C-111/75 Mazzalai v Ferrovia del Renon

JUDGMENT OF THE COURT 20 MAY 1976 <appnote>1</appnote>

Impresa Costruzioni Comm. Quirino Mazzalai v Ferrovia del Renon (preliminary ruling requested by the Tribunale di Trento)

Case 111/75

Summary

Grounds

1Questions referredforapreliminary ruling —Jurisdiction ofthe Court — Limits. (EEC Treaty, Article 177)

2Taxation — Legislation ofthe Member States — Harmonization — Turnover tax — Value-added tax — Chargeable event — Occurrence — Moment (Second CouncilDirective of11 April 1967, Article 6 (4) on the harmonization oflegislation)

1. Under Article 177, the Court of reference for a preliminary ruling is Justice has jurisdiction to give helpful for the purposes of the preliminary rulings concerning the decision in the proceedings pending interpretation of acts of the ins before them.

titutions of the Community, regardless 2. Article 6 (4) of the Second Council of whether they are directly Directive of 11 April 1967 cannot be applicable. interpreted as permitting the moment It is not for the Court to appraise the when the service is provided to be relevance of questions referred under identified with that when the invoice Article 177, which is based on a clear is issued or a payment on account is separation of jurisdictions and leaves made if these transactions take place to the national courts the task of after the service has been carried deciding whether the procedure of a out.

In Case 111/75

Reference to the Court under Article 177 of the EEC Treaty by the Tribunale di Trento for a prelininary ruling in the action pending before that court between

IMPRESA COSTRUZIONI COMM. QUIRINO MAZZALAI

and FERROVIA DEL RENON

1 — Language of the Case: Italian.

on the interpretation of Article 6 (4) of the Second Council Directive of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes — Structure and procedures for application of the common system of value-added tax (67/228/EEC), OJ, English Special Edition 1967, p. 16,

THE COURT

composed of: R. Lecourt, President, H. Kutscher and A. O'Keeffe, Presidents of Chambers, A. M. Donner, J. Mertens de Wilmars, P. Pescatore, M. Sørensen, Lord Mackenzie Stuart and F. Capotorti, Judges,

Advocate-General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts

The facts of the case, the procedure and as from 1 January 1973 in accordance the observations submitted under Article with the provisions of the third 20 of the Protocol on the Satute of the paragraph of Article 6 and Article 76 of Court of Justice of the EEC may be Decree No 633 of the President of the summarized as follows: Republic of 26 October 1972, which provides that:

— Services shall be deemed to have I — Facts and procedure been provided at the moment when the consideration is paid' (third In 1964, Impresa Costruzioni Comm. paragraph of Article 6)

Quirino Mazzalai entered into a contract — The tax shall be applicable … to the with Ferrovia del Renon SpA to carry out supply of goods and the provision of services after 32 December 1972.' certain works. These were completed in 1967, but because of a difference between (Article 76).

the parties as to the total cost of the works carried out, the final balance was It therefore asked Ferrovia del Renon for not paid until 1973. reimbursement of the value-added tax. Ferrovia, however, contested both the fact The Mazzalai undertaking took the view that value-added tax was applicable in that this payment should be made liable the present case and the corresponding to the value-added tax introduced in Italy reimbursement.

This case is at present pending before the Tribunale di Trento. During the proceedings the question whether the abovementioned provisions of the decree of the President of the Republic are in accordance with Community law was raised, that is, whether they are in accordance with Article 6 (4) of the Second Council Directive of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes — Structure and procedures for application of a common system of value-added tax (OJ, English Special Edition 1967, p. 16) which provides:

The chargeable event shall occur at the moment when the service is provided. In the case, however, of the provision of services of indeterminate length or exceeding a certain period or involving payments on account, it may be provided that the chargeable event shall already have occurred at the moment of issue of the invoice or, at the latest, at the moment of the receipt of the payment on account, in respect of the whole of the amount invoiced or received.'

By an order of 30 June 1975 entered in the Court Registry on 24 October 1975, the Tribunale di Trento stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty:

'Is Article 6 (4) of the Second Council Directive of 11 April 1967 (OJ, English Special Edition 1967, p. 16) to be interpreted as meaning that, in the case of the provision of services and, in particular, contracts for works, the chargeable event occurs at the moment when the service is provided and that each of the Member States has continuing authority to identify the chargeable event with the issue of an invoice or with a payment on account, whether the issue of the invoice or the payment on account takes place before completion of the work or, as in the present case, they take place after the said completion?'

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted on behalf of the Mazzalai undertaking by Serafino Giammarco, on behalf of Ferrovia del Renon by Angelo Facchin, on behalf of the Government of the Italian Republic by the Ambassador, Adolfo Maresca, assisted by Ivo Maria Braguglia and on behalf of the Commission of the European Communities by its Legal Adviser, Rolf Wägenbaur, assisted by Eugenio de March, member of the Legal Service.

The Court, after hearing the report of the Judge-Rapporteur and the views of the Advocate-General, decided to open the oral procedure without any preparatory inquiry.

The Commission of the European Communities replied in writing to the questions asked by the Court.

II — Written observations submitted to the Court

According to the Mazzalai undertaking the Court of Justice has no jurisdiction to give judgment on the question submitted for a ruling in this preliminary case.. If the Tribunale di Trento has doubts as to the constitutionality of the national provisions in question, it must bring the matter before the constitutional court.

Furthermore, the question raised in the present case is irrelevant. According to the rules on turnover tax, as regards the provision of services, the tax should have been paid when the consideration was paid and to the extent to which that payment was made. Since turnover tax was abolished on 1 January 1973, subsequent payment for a service provided before that date cannot be subject to that tax and must therefore be made liable to value-added tax.

In substance, the doubt expressed by the Tribunale di Trento is unfounded. The only contradiction between Article 6 of the Decree of the President of the Republic with the Community directive lies in the fact that the latter does not permit the chargeable event to be deferred until the moment of payment, after the service has been provided.

It seems clear that the purpose of the directive was above all to enable value-added tax to be charged on payments on account made before services have been provided and to enable value-added tax to be charged when invoices are issued, regardless of whether the services invoiced have been completed. But the directive certainly does not prohibit the moment when the liability to pay the tax arises, that is to say, the moment when the service is deemed to have been provided, from being the same as the moment when the consideration is paid and does not therefore prohibit the solution laid down in the Italian rules.

Nor would it be contrary to the directive to charge the new tax at the moment when payment is made, even if it were to be considered essential for Community purposes for the chargeable event to occur at the actual moment when the service is provided and for the liability to pay tax for the services provided before 31 December 1972 to arise from that moment. The legislature could, inter alia, have made such a situation wholly liable to value-added tax. It also chose that solution in order to prevent complications and easy tax evasion.

Lastly, Article 6 (4) of the directive refers only to contractual relations after the entry into force of the implementing provisions in the various countries.

After examining the Italian legislation on the matter, Ferrovia del Renon claims that the provision of services in question must be subject to turnover tax in accordance with the last paragraph of Article 90 of Decree No 633 of the President of the Republic which provides that:

660 'Liability, even though it be of a formal nature, arising from contractual relations entered into prior to 1 January 1970 [the date of the entry into force of Decree No 633 of the President of the Republic, as laid down by Article 94] shall remain unaltered for the taxes referred to in the present article'.

These taxes include turnover tax.

The statement that, as regards turnover tax, liability to pay the tax arises at the moment when payment for the services is made does not appear justified. In fact, a distinction must be made between the moment at which the liability to pay the tax arises and that at which the liability of the taxpayer actually to pay the tax to the public revenue takes effect. The chargeable event giving rise to turnover tax occurred at the moment when the contract was made and the services were provided, even if that tax had to be paid at the moment when payment for the services provided was made. The date on which payment of the tax becomes due must not be confused with the reason which gives rise to the payment.

The entry into force of a new tax cannot alter the substance of a liability which has already arisen. This principle is conformed specifically by the last paragraph of Article 90 of the abovementioned Decree No 633 of the President of the Republic: liability to pay turnover tax which arose before 1 January 1973 must in any case be discharged when the taxpayer's liability actually to pay the tax to the public revenue arises, on the basis of the rules on turnover tax which have been expressly kept in force as a transitional measure.

That interpretation is not incompatible with Article 6 (4) of the directive which refers to services provided after 1 January 1973, as laid down by Article 76 of the transitional provisions, under which value-added tax is introduced as from 1 January 1973 and applies … to the provision of services after 31 December 1972.

The Community rules confirm that interpretation. First, the date for the application of the system of value-added tax in Italy was fixed at 1 January 1973. As regards the provision of services, Article 6 (4) of the Second Directive makes the chargeable event coincide with the moment when the service is provided, but this moment may in certain cases be deferred or moved to a later date. As regards services provided after 1 January 1973 that directive therefore enables the moment when the chargeable event occurs to be fixed at different dates but that possibility may never be applied to services provided before 1 January 1973.

The Government ofthe Italian Republic considers that the conclusion may de drawn from the case-law of the Court of Justice, especially in its judgments in Cases 9/70 Franz Grad v Finanzamt Traunstein [1970] ECR 825 and 41/74, van Duyn v Home Office [1974] ECR 1337, that on the one hand, the Court, relying upon Article 177 of the EEC Treaty, confirms that Community measures other than regulations may, in certain cases, be directly applicable and, on the other hand, that it states that the procedure under Article 177 must be concerned with a directly applicable Community measure.

In fact, if the Community rule were not directly applicable in the national legal system, and if, consequently, the national court could not apply it, the interpretation given by the Court would be ineffective.

Although in general it is possible to distinguish between the aspect of the rule concerned with its direct applicability and the part which relates to its interpretation, the first stage of interpretation consists precisely in examining whether the rule is directly applicable.

A reference for a preliminary ruling on a Community rule which is not directly applicable is admissible, but certainly irrelevant The Italian Government considers, relying upon the general structure and function of Article 177, that in such a case the interpretative judgment of the Court must do no more than state that the rule is not directly applicable.

As regards, especially, coordinating directives, it may happen that the national law implementing the directive gives the court a margin of interpretation. In that case, an interpretation of the directive by the Court of Justice may be helpful to the national court 'so as to ensure that the law adopted for the implementation of that directive … should be applied in a manner which conformed to the requirements of Community law' (see the judgment in the Haaga Case, 32/74, [1974] ECR 1201).

On the other hand, if the interpretation of the Court reveals that a national law is incompatible with the directive, the national court must nevertheless apply the national law. In such a case, the interpretation given by the Court is of no help in solving the problem before the national court.

In the present case, it is necessary in fact to examine whether the Community rule referred to by the national court is directly applicable. If the reply is in the negative, the judgment of the Court must, as has just been shown, merely state that the rule is not directly applicable without enlarging upon its meaning.

First of all, the. Italian Government questions whether the Second Directive is compulsorily applicable to services provided under a contract to execute works. Under the directive, the delivery of movable property produced under a contract for work (Article 5 (2) (d)) or the delivery up of works of construction (Article 5 (2) (e)) are considered as supplies of goods. It is true that the Italian Republic has used the power given in paragraph (5) of Annex A, that is to say, to classify such transactions in the category of provision of services. But Article 6 (2) specifies that the rules laid down with regard to the taxation of the provision of services shall be compulsorily applicable only to services listed in Annex B, which do not include those which stem from contracts to execute works or to execute works and supply materials therefor.

Consequently, if the services do not fall within either Article 5 or Article 6, it is necessary to conclude that the Second Directive does not apply to the services in question.

Although that statement makes any further analysis futile, the Italian Government nevertheless continues to examine the problem of the direct applicability of the rule in question.

The directives on value-added tax based on Articles 99 and 100 of the EEC Treaty constitute coordinating directives which, in general, do not contain directly applicable rules. The Member States may lawfully achieve the objective of a rule contained in a coordinating directive by employing various means. What matters is therefore that the result attained by the national rules as a whole is in conformity with the objective of the directive and not that each national rule is in conformity with the corresponding rule contained in the directive.

Consequently general appraisal of their conformity or otherwise can be reviewed only during, for example, a procedure such as that referred to in Article 169 of the EEC Treaty. That applies in any case to rules intended only to coordinate or harmonize.

As regards the provision referred to in the present case, it merely states the guiding criterion and provides for certain exceptions.

662 First of all, that rule is not intended to impose duties or prohibitions on Member States, still less duties or prohibitions to which subjective rights for individuals correspond. Further, the provision is neither clear nor precise. It states an obvious principle, that is to say, that the chargeable event occurs at the moment when the service is provided. However it leaves uncertain and does not specify when that moment occurs in each of the contractual or legal situations from which a provision of a service and consequently a transaction which must be made liable to value-added tax may result. The rule contained in Article 6 (4) amounts only to a guiding principle requiring several supplementary details.

Consequently, since that rule is not directly applicable in the sense that it does not confer subjective rights on individuals which national courts must protect, the Court must merely state that the question referred by the Tribunale di Trento has no purpose.

Nor would that conclusion be different if the fact were taken into consideration that the 'Community rules' are mentioned in Article 5 of Delegating Law No 825 of 9 October 1971 as rules with which the legislative body to which delegation is made must comply.

As a result of this reference provisions of the directives concerned have become provisions of national law and it is therefore for the national court alone to examine whether and within what limits the provisions contained in the directives have been incorporated into the national legal system and to interpret the contents of those provisions.

As for the actual question referred by the national court, the Italian Government emphasizes the difficulties for the Italian legislature stemming from Article 6 (4) of the Second Directive.

First, the very great variety of relations which must be made liable to value-added tax as constituting the provision of services has made it extremely difficult, if not impossible, to fix in an abstract provision, the final moment at which each type of relation giving rise to the performance of a service is completed.

Secondly, the chargeable event, which is linked to the date when payment of the tax falls due, should have been specified at the moment when the taxable event is complete. It therefore seemed necessary on the one hand to adopt a legislative decision convering all types of contracts or ex lege duties giving rise to a taxable service and, on the other, to take account — also in order to determine the moment of taxation — of the consideration, an element fundamental to the completion of the taxable event itself.

Article 6 of Decree No 633 of the President of the Republic was adopted on the basis of the principle laid down by the Community rule and in order to fulfil the abovementioned requirements. Looked at as a whole and from the point of view of its structure, the system of value-added tax provides, in complete accordance with the Community criteria, that the tax consequences of the taxable transaction start to run at the moment when both the financial and economic effects of the transaction itself occur, which, on the other hand, constitute the basis of assessment (Article 8 (a) of the Second Directive; first paragraph of Article 13 of Decree No 633 of the President of the Republic).

Further, the Italian Government observes that the execution of Article 6 (4) of the directive has not been uniform or easily accomplished. In fact the matter in question, which is under review, has given rise to several disputes.

In conclusion, Article 6 of Decree No 633 of the President of the Republic, in that it fixes the moment when services are deemed to have been provided, is based on the fundamental criterion set out in Article 6 (4) of the directive in question but it goes further than this criterion in order to overcome the difficulties which have already appeared and to include in addition among the factors which determine the chargeable event payment of the consideration.

The Commission observes that under paragraph (8) of Annex A to the directive in question, the 'chargeable event' means the event giving rise to the tax. The chargeable event consists in a factual situation in which the tax rule creates the liability of a specific taxable person to pay tax. It depends upon the existence of a tax and is the necessary and sufficient pre-requisite for deciding, in each case, when the liability to pay the tax arises. Nevertheless the chargeable event does not exhaust the series of factors necessary for the purpose of determining the extent of the liability and must not therefore be confused with the date when payment of the tax falls due.

As regards the provision of services, Article 6 (4) of the directive specifies that the chargeable event shall occur at the moment when the service is provided and provides that in certain specific cases it is possible to derogate from the general rule. It is precisely the extent of that possibility given to the Member States which is the subject of the present question referred for a preliminary ruling.

The literal interpretation of this provision is enough to make clear that in the cases which have been restrictively prescribed, the Member States can only bring forward the moment when the liability to pay tax arises, by linking it to the issue of an invoice or the receipt of a payment on account in relation to the moment when the service is actually provided.

The adverb 'déjà' used in the French text emphasises that the moment to be taken into account is prior to the moment laid down by the general rule.

That conclusion is confirmed by a logical forward the date on which the liability to interpretation of the text: in accordance pay tax with regard to the sums in with commercial usage, certain contracts question arises; that however is without for services provide for payments on prejudice to the applicability of the rule account before the service is completed; that the liability to pay the tax can in no in case of provision of services of case arise after the service has been indeterminate length or over a long provided.

period, contracts may expressly give the person providing services the right to

III — Oral procedure issue an invoice to the person placing the

order for a varying part of the sum The Government of the Italian Republic involved before the service has begun or and the Commission of the European before the service has been completed.

Communities presented oral argument at Since in such cases a transfer of money the hearing on 17 March 1976.

takes place before the service has been provided, the directive gives the national The Advocate-General delivered his legislations the opportunity to bring opinion at the hearing on 6 April 1976.

Law

1 By an order of 30 June 1975, received by the Court Registry on 24 October 1975, the Tribunale di Trento referred to the Court of Justice for a preliminary ruling the question whether 'Article 6 (4) of the Second Council Directive of 11 April 1967 (OJ, English Special Edition 1967, p. 16)' must be interpreted 'as meaning that, in the case of the provision of services and, in particular, contracts for works, the chargeable event occurs at the moment when the service is provided and that each of the Member States has continuing authority to identify the chargeable event with the issue of an invoice or with a payment oh account, whether the issue of the invoice or the payment on account takes place before completion of the work or, as in the present case, they take place after the said completion'.

2/3 The question has been raised in proceedings concerning the amount due either in respect of turnover tax or in respect of value-added tax on the balance paid in 1973 by Ferrovia del Renon, the defendant in the main action, to the Mazzalai undertaking, the plaintiff in the main action, for works in relation to the construction of the Bolzano-Sopra Bolzano cable railway completed in 1967. The plaintiff in the main action who had paid value-added tax at the rate of 12 % on the sum charged pursuant to the national legislation which entered into force on 1 January 1973, applied to the defendant in the main action for reimbursement of the tax paid, but encountered the objection that because the works had been carried out as long ago as 1967, only turnover tax, which at that time was applicable at the rate of 4 %, could be taken into consideration.

4/5 In accordance with the Community directives, value-added tax was introduced in Italy as from 1 January 1973 in application of Delegating Law No 825 of 9 October 1971 (Gazzetta Ufficiale della Repubblica Italiana No 263 of 16 October 1971) and the corresponding Presidential Decree No 633 of 26 October 1972 (Gazzetta Ufficiale della Repubblica Italiana No 292 of 11 November 1972). Although Article 76 of this decree provides that the tax applies to the supply of goods and the provision of services (works carried out under a contract for works are treated as such) after 31 December 1972, the third paragraph of Article 6 provides that 'services shall be deemed to have been provided at the moment when the consideration is paid'.

6During the procedure the Italian Government called in question both the relevance of the question to the outcome of the main action and the Court's jurisdiction, especially because, it claimed, on the one hand the Community rule, in the present case the Second Directive, is not directly applicable and cannot therefore produce direct effects, and, on the other, the proceedings are in substance concerned with problems of transitional law on which the Community rule is silent and which come only under national law.

7/9 Under Article 177, the Court of Justice has jurisdiction to give preliminary rulings concerning the interpretation of acts of the institutions of the Community, regardless of whether they are directly applicable. The question referred exclusively concerns the interpretation of Article 6 (4) of the directive and the Court therefore has jurisdiction. Furthermore it is not for the Court to appraise the relevance of questions referred under Article 177, which is based on a clear separation of jurisdictions and leaves to the national courts the task of deciding whether recourse to the procedure of a reference for a preliminary ruling is helpful for the purposes of the decision in the proceedings pending before them.

10/11 In addition, regardless of the effects of the directive, in cases such as the present, an interpretation of the directive may be helpful to the national court so as to ensure that the law adopted for the implementation of the directive is interpreted and applied in a manner which conforms to the requirements of Community law (Friedrich Haaga GmbH, Case 32/74, [1974] ECR 1201). The same may be true of the problems of transitional law raised by the proceedings.

12/14 As for the question raised, under Article 6 (4) of the Second Council Directive of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes — Structure and procedures for application of the common system of value-added tax The chargeable event shall occur at the moment when the service is provided. In the case, however, of the provision of services of indeterminate length or exceeding a certain period or involving payments on account, it may be provided that the chargeable event shall already have occurred at the moment of issue of the invoice or, at the latest, at the moment of the receipt of the payment on account, in respect of the whole of the amount invoiced or received'. Whilst the first sentence of the paragraph lays down the general rule, the second sentence makes provision for the possibility of certain derogations from that rule. These derogations apply, however, only to cases in which payments on account are made before the service or services have been fully provided and therefore envisage only an anticipation of the moment when, according to the first sentence, the tax is payable.

15/16 On the contrary, the paragraph in question makes no mention of the possibility of deferring that moment beyond the moment when the service or services are provided in full. Consequently, national provisions which make the moment when the service is provided coincide with that when the consideration is paid go beyond the limits laid down by the paragraph in question.

17 Therefore it is necessary to reply that Article 6 (4) of the directive cannot be interpreted as permitting the moment when the service is provided to be identified with that when the invoice is issued or a payment on account is made if those transactions take place after the service has been carried out.

Costs

Costs

18 The costs incurred by the Government of the Italian Republic and the Commission of the European Communities, which submitted their observations to the Court, are not recoverable.

As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT

in answer to the question referred to it by the Tribunale di Trento by order of 30 June 1975 hereby rules:

Article 6 (4) of the Second Council Directive of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes cannot be interpreted as permitting the moment when the service is provided to be identified with that when the invoice is issued or a payment on account is made if these transactions take place after the service has been carried out.

Lecourt Kutscher O'Keeffe Donner Mertens de Wilmars

Pescatore Sørensen Mackenzie Stuart Capotorti

Delivered in open court in Luxembourg on 20 May 1976.

A. Van Houtte R. Lecourt

Registrar President

OPINION OF MR ADVOCATE-GENERAL REISCHL DELIVERED ON 6 APRIL 1976 <appnote>1</appnote>

MrPresident, completed in 1967; moreover, some of Members ofthe Court, the instalments were paid until completion. Differences later arose The Ferrovia del Renon in Bolzano and concerning inter alia the total costs and the Mazzalai firm in Trento entered into the outstanding balance thereof. The an agreement in 1964 pursuant to an dispute was settled by an enforceable invitation to tender for the construction decision of the Appeals Court in Trento of a suspension cable railway near of 10 December 1972, in which the Bolzano. The construction work was outstanding balance was quantified. This

1 — Translated from the German.

OPINION OF MR ADVOCATE-GENERAL REISCHL

DELIVERED ON 6 APRIL 1976 ¹

Mr President,

Members of the Court,

The Ferrovia del Renon in Bolzano and the Mazzalai firm in Trento entered into an agreement in 1964 pursuant to an invitation to tender for the construction of a suspension cable railway near Bolzano. The construction work was completed in 1967; moreover, some of the instalments were paid until completion. Differences later arose concerning inter alia the total costs and the outstanding balance thereof. The dispute was settled by an enforceable decision of the Appeals Court in Trento of 10 December 1972, in which the outstanding balance was quantified. This amount was then paid after 31 December 1972.

This date is important, because on 1 January 1973, as provided for in the fourth directive 71/401/EEC of 20 December 1971 (OJ 1971, L 283, p. 41), the system of value-added tax was introduced in Italy. This was effected by virtue of the enabling Law No 825 of 9 October 1971 and the Decree of the President No 633 of 26 October 1972. The latter provides that value-added tax is chargeable on the supply of goods and services after 31 December 1972 (Article 76). According to Article 6 of the decree services are deemed to be provided at the moment when the consideration is paid.

Under these provisions Mazzalai had to pay value-added tax at the rate of 12 % on the balance received from Ferrovia del Renon in 1973. It demanded payment of a corresponding amount from Ferrovia del Renon calculated from June 1973. Ferrovia del Renon refused payment; it was only willing to pay turnover tax at the rate of 4 % under the system previously in force.

In the legal proceedings which Mazzalai thereupon brought, Ferrovia del Renon relied on the second Council Directive of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes, and in particular on Article 6 (4) thereof which provides that The chargeable event shall occur at the moment when the service is provided'. It pointed out that Article 5 of the Italian enabling Law of 9 October 1971 already mentioned refers to the directive and states that the rules on value-added tax must be compatible with Community law. However Presidential Decree No 633 of 26 October 1972 is not compatible with it, because under Article 6 thereof services are to be treated as being provided at the moment when the consideration is paid.

In view of these arguments the court seised of the dispute stayed the proceedings and by order of 30 June 1975, which reached the Court of Justice on 24 October 1975, referred the following question to it under Article 177 of the EEC Treaty for a preliminary ruling:

‘Is Article 6 (4) of the second Council Directive of 11 April 1967 (OJ, English Special Edition 1967, p. 16) to be interpreted as meaning that, in the case of the provision of services and, in particular, in the case of works contracts, the chargeable event occurs at the moment when the service is provided, and that individual Member States have continuing authority to identify the chargeable event with the issue of an invoice or with a payment on account, whether the issue of the invoice or the payment on account takes place before completion ot the work or, as in the case under review, if they take place afterwards?’

Before I can examine this question I must make some preliminary observations. They are prompted by the submissions of some of the parties to the proceedings relating to the admissibility of the request for a preliminary ruling.

1The defendant in the main action submits that under Article 90 of Decree No 633 liabilities arising out of relations which came into being before 1 January 1973 are not affected. In its view the entry into force of a new tax law cannot change liabilities which have already arisen. Accordingly the inference to be drawn from Articles 6 and 76 of Decree No 633 is that it cannot be applied to services which were performed before its entry into force.

The plaintiff in the main action on the other hand points out that the tax due under the earlier turnover tax law had to be paid, in the case of services, when the consideration was provided. If, as happened in this case, the consideration was provided after 1 January 1973, the services can therefore only be taxed under the new value-added tax system, for the very good reason that the earlier turnover tax rules were at that time no longer in force.

In my opinion there is no need to concern ourselves any more with these arguments. They clearly relate to a question of their relevance to the decision to be taken by the court making the reference, that is to say, to the question whether the interpretation of the second directive is in any way relevant to the facts such as those in the present case. It has been settled for a very long time by the case law of the Court that such objections as to the relevance of any matter to the decision to be taken by the court making the reference can only be considered in very exceptional cases. They are undoubtedly irrelevant if they are based on considerations arising out of national law, for the Court does not have jurisdiction under Article 177 to undertake examinations of this kind. Since the arguments put forward by the parties to the main action, with which we are now concerned, are undoubtedly derived from the field of national law, it appears to be impossible to regard them as a justification for refusing to answer the question referred by the Tribunale di Trento.

2During the proceedings it was also argued that the kind of taxation to be applied was laid down for the national court in this case by a national law. The court is said to be bound to apply this law. It cannot disregard it, even should it take the view that this law is incompatible with a Community directive, because Community measures of this kind cannot by virtue of their legal nature supersede national legal provisions which diverge from them. It is therefore not relevant to the main action to know the meaning and scope of the second directive on value-added tax.

I am convinced that this reasoning, which again is concerned with the relevance of the question referred to the decision in the main action, cannot be followed. In this connexion one may leave aside — and I will return to this point — whether the provision of the second Council directive concerning value-added tax mentioned by the court making the reference is directly applicable according to the Court's case-law and has the effect of superseding national rules of law. The only material factor — attention was drawn to this point in the proceedings — is that the Italian enabling Law No 825, upon which Decree No 633 is based, refers to Community law and provides that the Italian rules on value-added tax must comply with the provisions of Community law. It can therefore be said that, for the purpose of interpreting the said enabling Law, it is material to know the scope of the directive concerning value-added tax irrespective of the answer to be given to the question whether the effect of the reference contained in the enabling Law is that the Community provisions referred to have become national law. Further the question whether the court making the reference can itself rule on the compatibility of the decree with the enabling Law or whether such a power is reserved to the Constitutional Court can, as far as we are concerned, remain open. It must in each case be acknowledged that, at least for the purpose of answering the question whether the problem of the compatibility of Decree No 633 with the enabling Law should be submitted to the Constitutional Court, it is necessary to know exactly what principles the directive mentioned in the enabling Law laid down. This is sufficient for the purposes of conducting proceedings relating to preliminary rulings; on the other hand it does not appear in any way to be tenable to argue that the reference is to be treated as premature and to take the view that only the Constitutional Court, after the matter has been brought before it by the court making the reference, can raise the question which has been referred.

3A further objection which must also be dealt with as a preliminary point was raised by the Italian Government. It submitted that a national court can only ask for those Community measures to be interpreted, which are directly applicable and which it therefore has to apply. In the view of the Italian Government this principle does not apply to the relevant Council directive. It was issued pursuant to Articles 99 and 100 of the EEC Treaty and its sole purpose is the harmonization of the laws of Member States. It is moreover clear that Article 6 (4) of the second Council directive does not impose any obligation on Member States; it requires in any case supplementary legislation and cannot therefore be regarded as sufficiendy clear and precise in the sense which emerges from the relevant case-law. Consequently the Court should confine itself to finding that the directive is not directly applicable. Further, there is no need for the Court to examine the contents of the directive.

In my view Article 177 of the EEC Treaty cannot be given such a narrow interpretation. It is clear that the jurisdiction to interpret embodied in that Article, if the Treaty is disregarded, applies in general to all Community legal measures. In fact it can readily be imagined that Community measures other than those which are directly applicable may be relevant in national legal proceedings. This is for example what happened in Case 32/74 (Judgment of 12 November 1974, Friedrich Haaga GmbH [1974] ECR 1201). In that case a Community directive was interpreted, without any preliminary finding that it was directly applicable, for the simple reason that it was relevant for determining the scope of a national law. There is a similar situation in the present case where — as I have already pointed out — the interpretation of the directive is important in relation to Article 5 of the enabling Law No 825 which contains clear references to Community law.

Moreover, I would not admit the argument, which was also submitted in this connexion, namely that acceptance of a request for an interpretation could lead to an overlapping with and to the detriment of proceedings under Article 169 of the EEC Treaty, that is to say, to an adverse effect on proceedings in which the compatibility of national laws with Community directives primarily falls to be examined. That may indeed be true, but it is irrelevant, because such consequences cannot be ruled out in proceedings relating to preliminary rulings which relate to the interpretation of directly applicable Community laws and which are clearly admissible.

It has therefore to be said — and it is with this observation that I dispose of this point — that there is no need to give a ruling on the direct applicability of the value-added tax directive, because no request has been made for any such ruling. The Court is in no way limited to pronouncing on this aspect but is fully entitled to define its position as to the interpretation of the content of the value-added tax directive, which is what the court making the request has requested it to do.

4Finally there are still two questions to be examined as preliminary points which relate to the interpretation of the directive if not to the problem raised by the court making the reference. I am dealing with them in the present context, because they also refer to the relevance of the question referred to the decision in the main action.

Thus it was argued on the one hand that the directive did not cover services, which were provided before the entry into force of national implementing provisions, and that the directive on the contrary only applies to relationships formed after the entry into force of national laws giving effect to the directive.

On the other hand the Italian Government doubted whether the directive at all covers services which are provided under a works contract.

With reference to the first point it is in my opinion right to proceed on the assumption that, when the system of value-added tax was introduced — in Italy from 1 January 1973 — the principles laid down in the directive governing the structure and procedures for the system of value-added tax were binding. From that time onwards those Community principles which relate to the occurrence of the chargeable event are decisive. In fact nowhere in the directive is there any indication that outstanding tax cases arising in earlier years could be dealt with after the said date in disregard of the principles mentioned in the directive.

So far as the doubts expressed by the Italian Government are concerned, it must first be recalled that according to Article 5 (2) (e) of the second directive on value-added tax ‘the delivery up of works of construction, including those in which moveable property is incorporated in immoveable property’ is considered as supply of goods. On the other hand paragraph 5 of Annex A of the directive empowers Member States, which for specifically national reasons cannot consider the transactions just mentioned as supply, to classify them in the category of provision of services. Italy made use of this power in Article 3 of Decree No 633. Having regard to this fact and because Article 6 (2) of the directive in addition provides that the provisions laid down in the directive as regards the taxation of the provision of services shall be compulsorily applicable only to services listed in Annex B, and also because works contracts of the kind at issue in the main action are not expressly listed in Annex B, the Italian Government came to the conclusion that it was doubtful whether they were covered by the decision.

In fact these doubts are also without foundation. The wording of paragraph 5 of Annex A supports this view, for under this paragraph Member States which cannot consider the transactions referred to in Article 5 (2) (e) as supply shall classify them in the category of provision of services and subject them to the rate which would be applicable to them if they were considered as supply. This means that such transactions fall within the field of application of the directive, that Member States, which make use of the opportunity offered by paragraph 5 of Annex A, are in no way free to refrain from taxation; it is merely the classification of the transactions in question which is left to their discretion.

Moreover it is interesting to note the way in which paragraphs 2, 3 and 8 are arranged. It can in fact be said of the services listed in these paragraphs that they presume that works contracts, too, are subject to the tax and that main services are included in the same way as the additional services under paragraph 8.

Finally it is also of importance that the sixth recital of the directive — and this clearly relates to the question at issue in this case — only states that it has proved possible to leave Member States themselves to make rules concerning the numerous services whose cost has no influence on the prices of goods. This certainly does not apply to the services at issue in the main action.

Thus there is also no ground for refusing, on the basis of the actual field of application of the directive, to give the interpretation requested.

After making these necessary preliminary observations on matters concerning the relevance of the question referred to the decision in the main action, I now turn my attention to the substance of the request for a preliminary ruling. This makes it necessary to consider whether Article 6 (4) of the directive on value-added tax is to be interpreted as meaning that in the case of works contracts the chargeable event occurs at the moment of issue of the invoice or of the receipt of the consideration, even if these events follow the provision of the service.

Let me first of all recall the wording of the provision at issue. It reads as follows:

‘The chargeable event shall occur at the moment when the service is provided. In the case, however, of the provision of services of indeterminate length or exceeding a certain period or involving payments on account, it may be provided that the chargeable event shall already have occurred at the moment of issue of the invoice or, at the latest, at the moment of the receipt of the payment on account in respect of the whole of the amount invoiced or received’.

It has become clear from my previous observations that the court making the reference was right to refer to Article 6 (4) of the directive concerning value-added tax. Whilst it is true that contracts of the kind at issue in this case are considered, on the basis of the definition of Italian civil law, as ‘supply of goods’ according to Article 5 of the directive concerning value-added tax, Article 6, however, has effect because Italy availed itself of the opportunity presented by paragraph 5 of Annex A.

On the question of the construction of the expression ‘service is provided’, which is the principal issue in this case, the Italian Government expressed the view that having regard to the variety of possible legal relations which come into consideration in connexion with the provision of services, the stipulation in general terms of a time-limit in an abstract provision is not possible. It is often difficult to determine when services have been provided since at times an acceptance is necessary or a trial period must have elapsed. In addition the consideration is frequently not stipulated in advance. In particular in the case of public works experience shows that again and again the consideration which the parties had in mind has to be revised. Looked at in this light it must appear to be inappropriate to sever the coming into being of the tax liability from the basis of its assessment, namely the consideration, the payment of the tax falling due only when the consideration is provided. For all these reasons the acceptance by individual Member States of the payment of the consideration as the moment when the service is provided must, however, be considered as compliance with the directive.

The Commission opposes this argument. It supports its view by relying on the wording, system and purpose of the rules on value-added tax. It also refers to events which preceded the adoption of the directive and throw light on the particular problem at issue.

When considering this divergence of views it is above all necessary not to overlook the fact that Article 6 (4) of the directive on value-added tax and also the corresponding Article 5 (5) thereof are only concerned with the occurrence of the chargeable event, that is to say — according to the definition of paragraph 8 of Annex A — with the event giving rise to the tax. Other factors must of course supervene, which are not at issue in this case, before the amount of the tax can be determined and the tax becomes payable.

When interpreting a legal provision one must in the first place proceed on the basis of its wording: it is therefore necessary to bear in mind that Article 6 (4) provides that the chargeable event shall occur at the moment when the service is provided. This clearly means that, in the case of contractual relations, which are of paramount importance in this case, what is of importance is the performance by one of the parties to a contract of his obligations thereunder. Moreover such performance must, by reason of its legal nature be clearly distinguished from the performance by the other party of his obligations, that is to say, the consideration. If this is borne in mind it can hardly be accepted that a legal text drafted in this way treats the provision of services on the same footing as the provision of the consideration or that it permits such equal treatment without any suggestion of the existence of a discretion.

The fact that the concept of ‘consideration’ is used in another context in the directive itself is an additional argument against this assumption. This occurs first in Article 8 which defines the basis of assessment It happens again in the second sentence of Article 6 (4) which provides for derogations from the principle contained in the first sentence. However the important point to note is that it is clear from the wording that these derogations only apply to cases where part of the consideration is provided before the provision of services has been completed, where therefore, money passes before the moment at which in principle the tax liability arises and therefore the coming into being of the tax liability is brought forward.

It is also worth noting that when the directive was being drafted the idea of making the coming into being of the tax liability dependent upon the provision of the consideration was fully considered. Thus the Economic and Social Committee in its opinion on the proposal for a second directive on the harmonization of the laws of the Member States concerning turnover taxes stated that in certain cases it is difficult to determine the moment when the service is provided and from this it drew the conclusion that it would be simpler to provide a single chargeable event,‘in which case the moment when payment is collected can be considered’ (JO 1966, p. 572). Although this proposal has not been accepted by the Commission and the Council, it is not however admissible to arrive at a similar result by means of an interpretation of another text which has been deliberately drafted in a different way.

Finally the purpose of the value-added tax directive must be recalled. It is intended to bring about the widest possible harmonization of the law on value-added tax. It is therefore to be assumed that the directive uses the most precise concepts possible and is designed to be as complete as possible. In these circumstances it is scarcely possible to agree with the view that the freedom of action left to Member States is so wide that, for the purpose of establishing when the chargeable event occurs in the case of the provision of services, they can go beyond the provision of the service and take the moment when the consideration passes, which freqently happens much later. In fact in this way uniformity — one has in mind for example cases where the rate of the tax is altered — would be abandoned to an unacceptable extent if the determination of the moment when the chargeable event occurred in such cases depended in the final analysis upon the intention of the taxpayer.

Even if it has to be admitted that the determination of the moment when the provision of services occurs can in some circumstances cause certain difficulties — we are certainly not concerned with exceptional problems which have to be settled in cases of dispute — and although we have been shown that other Member States have also not implemented the directive in a wholly correct manner, in view of the arguments which have been submitted I have no alternative but to acknowledge that the interpretation of Article 6 (4) of the second directive on value-added tax proposed by the Commission is the only one which is correct.

The question of the Tribunale di Trento should therefore be answered as follows:

Article 6 (4) of the Second Council Directive of 11 April 1967 is to be interpreted as meaning that in the case of the provision of services the chargeable event is to be regarded in principle as occurring at the moment when the services are in fact provided. Member States have the opportunity, however, in the case of the provision of services of indeterminate length or exceeding a certain period or involving payments on account, to provide that the chargeable event shall occur at the moment of issue of the invoice or, at the latest, at the moment of the receipt of the payment on account in respect of the whole of the amount invoiced or received.

¹ Translated from the German.