C-126/78 Nederlandse Spoorwegen v Staatssecretaris voor Financiën

service listed in Annex B save in an included in the aforementioned Annex exceptional case which justifies an B, item 5, which contains the list of adverse effect upon neutrality in services compulsorily taxable under competition. It must be concluded Article 6 of the directive. The national that the collection of the price of court must take account of the goods transported, a service ancillary combined provisions of Article 6 (2) to the transport of goods, cannot be and of Annex B, item 5.

exempted from turnover tax since it is

In Case 126/78

REFERENCE to the Court under Article 177 of the EEC Treaty by the Hoge Raad of the Netherlands for a preliminary ruling in the proceedings pending before that court between

N.V. NEDERLANDSE SPOORWEGEN, Utrecht,

and

STAATSSECRETARIS VAN FINANCIEN

on the interpretation of certain provisions of the Second Council Directive (No 67/228/EEC) of 11 April 1967 (Official Journal, English Special Edition 1967, p. 16) 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 COURT

composed of: H. Kutscher, President, J. Mertens de Wilmars and Lord Mackenzie Stuart (Presidents of Chambers), P. Pescatore, M. Sørensen,

A. O'Keeffe and A. Touffait, Judges

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

gives the following NEDERLANDSE SPOORWEGEN v STAATSSECRETARIS VAN FINANCIEN

JUDGMENT

Facts and Issues The facts of the case, the course of the procedure and the observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts and written procedure

Legal context and the dispute

1 The company N.V. Nederlandse Spoorwegen, Utrecht, an undertaking within the meaning of the Wet op de omzetbelasting 1968 [Law of 1968 on turnover tax], Staatsblad, 1968, No 329 (hereinafter referred to as "the Law of 1968") is engaged in passenger and goods transport.

A subsidiary company, Van Gend & Loos N.V., Utrecht, together with which N.V. Nederlandse Spoorwegen is regarded as one undertaking for the application of the Law of 1968 provides inter alia a cash-on-deiivery service for which, in addition to the transport charge, a separate fee termed the cash-on-delivery commission is charged.

It charged the cash-on-delivery commission increased by the turnover tax to its principals and subsequently included the tax in its tax declarations.

In determining the deduction of input tax on the basis of Article 15 of the Law of 1968 N.V. Nederlandse Spoorwegen accordingly did not declare the aforesaid collection as a service within the meaning of Article 11 of the Law of 1968 and exempt from tax. The Netherlands revenue authorities, however, took the view that the cash-on-delivery commission is charged for a service which is performed independently of the agreement for the carriage of the goods, with the result that such service, as the collection of moneys payable, is exempt from turnover tax on the basis of Article 11 (j) of the Law of 1968, which expressly covers inter alia, the collection of financial obligations (het innen ... van geldvorderingen).

By a tax demand by way of turnover tax for the years 1970 to 1974 the revenue authorities therefore retrospectively levied the amount of the input tax which N.V. Nederlandse Spoorwegen had deducted under Article 15 of the Law of 1968.

N.V. Nederlandse Spoorwegen challenged not the amount but the legal basis of the assessment. It contested the assessment in question before the Tariefcommissie, claiming that the service in question was indeed ancillary to the carriage of goods and as such subject to tax in the Netherlands under the Second Council Directive No 67/228/EEC 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 (Official Journal, English Special Edition 1967, p. 16).

Article 6 (2) of the Directive provides:

"The rules laid down in this Directive as regards the taxation of the provision of services shall be compulsorily applicable only to services listed in Annex B."

Annex B, item 5, to the Directive covers:

"transport and storage of goods, and ancillary services."

By judgment of 1 March 1977 the Tariefcommissie dismissed the claim of N.V. Nederlandse Spoorwegen, noting that Point 10 "Regarding Article 6 (2)" of Annex A to the Directive provides that:

"Member States shall refrain, as far as possible, from granting exemption from tax in respect of the provision of the services listed in Annex B."

Pursuant to that provision the Tariefcommissie found that quite apart from the question of whether the collection of the price of goods which N.V. Nederlandse Spoorwegen carries goods before delivering them to the consignee (cash-on-delivery system) is the collection of that price a service ancillary to the transport within the meaning of item 5 of Annex B to the Second Directive of the Council of the European Communities of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes?

II. If so, are the Member States free, in the application of the turnover tax, to treat an ancillary service such as the aforesaid collection of the cash-on-delivery price separately in such a" way that the services of transport and storage of goods referred to in item 5 of Annex B are not exempted from turnover tax but-the ancillary service of collection of money is so exempted?

III. (a) If the answer to Question II is in

on a cash-on-delivery basis is an "ancillary" service within the meaning of Annex B, item 5, to the Second Directive, the powers which the Member States have in this matter rule out any recourse to Article 6 (2) of that Directive in this case.

When the Tariefcommissie thus found that it was not contrary to the provisions of the Second Directive to grant exemption in respect of the "cash-on-delivery" arrangement as provided for in Article 11 (j) of the Law of 1968, N.V. Nederlandse Spoorwegen brought an the affirmative, can the exchange of letters between the Netherlands Government and the European Commission referred to in the opinion of Mr Advocate General Van Soest be regarded as the consultation referred to in Article 16 of the Second Directive?

(b) If not must the national court before which it is claimed that no consultation took place take account of this?

IV. If Question II is answered in the

appeal against that judgment before the Hoge Raad of the Netherlands.

Since the Hoge Raad took the view that the problem relates to Community law, by judgment dated 24 May 1978 it stayed the proceedings and referred the following questions to the Court of negative, must a national court before which Article 6 (2) of the Second Directive in conjunction with the provisions of item 5 of Annex B is invoked take account of this?"

2 A copy of the judgment making the Justice under Article 177 of the EEC Treaty:

reference was received at the Court on 2 June 1978.

"I. If a carrier has undertaken, in The Government of the Kingdom of the addition to the transport of the goods, to collect the price of the

2044 Netherlands, represented by the Minister for Foreign Affairs, N.V. Nederlandse Spoorwegen, represented by S. L. Buruma, and the Commission of the European Communities, represented by its Legal Adviser, Raymond Baeyens, acting as Agent, submitted written observations under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General the Court decided to open the oral procedure after inviting the Commission to give written answers to certain questions.

II — Written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

1. The following are the principal observations of N.V. Nederlandse Spoorwegen:

(a) First Question

In practice, at least in Netherlands practice, there is hardly any longer any collection of cash debts on a commission basis save as a service ancillary to transport. The former activity of the receipt bearer has disappeared both as a self-employed activity and as employment carried on on behalf of a company. This does not mean that the era of collecting cash debts for third parties is over. The exemption granted by Article 11 (j) of the Law of 1968 applies only to the normal business of collection and not to collection involving other duties.

The practice involved is as follows: the supplier sends goods by means of a carrier to the buyer; on dispatch the buyer has not yet paid for the goods; the supplier however does not use the services of a receipt bearer, but relies solely on a payment clause. Collection of the debt before delivery of the goods has therefore become a typical (ancillary) transport service. To conclude:

— Already during the appeal Van Gend & - Loos maintained that the cash collection clause was not a service separate from the carriage but an integral part thereof, so that there was only a single contract (of carriage) and not an agency agreement in addition to a contract of carriage as if there were two contracts instead of one.

— The Advocate General also observed before the Hoge Raad that according to the accepted view of private law the contract entered into between the consignor and the carrier in the case of cash-on-delivery was considered as a single contract. It does not seem possible for the revenue court, interpreting fiscal provisions, unnecessarily to give civil contracts an interpretation differing from that of the accepted view of private law.

— In conclusion, the first question should be answered to the effect that in the case of carriage subject to cash-on-delivery, the collection cannot be separated from the contract of carriage (there cannot be said to be two distinct services) and that the collection therefore comes within the concept of "transport" within the meaning of Annex B, item 5, to the Second Directive No 67/228/EEC or at least that it must be treated as an "ancillary service" within the meaning of that provision.

(b) Second Question

It is necessary to consider the following provisions in answering this question: — Article 6 (2) and Point 10 of Annex A;

— Article 10 and Point 19 of Annex A;

— Items 5 and 10 of Annex B, and

— Article 16

of the aforementioned Second Directive and Article 102 (1) of the EEC Treaty.

— The wording of Article 6 (2) of the Second Directive and of Point 10 of Annex A thereto (especially the French version) shows that the Member States have practically no discretion in the matter and reinforces the mandatory nature of the taxation of the services listed in Annex B.

— As for the possibility allowed by Article 10 (3), it should first of all be observed that the Netherlands is the only country of the Community which grants exemption from turnover tax in respect of cash-on-delivery commission. Without exaggerating the importance of the matter it would be difficult to deny that such a situation is likely to cause distortion.

Secondly, there is no document in the case showing that the Netherlands have considered this exemption necessary. The documents show, on the other hand, that it has been sought to maintain a practice followed for some time under the former law.

(c) Third Question

It appears from the correspondence between Van Gend & Loos and the Commission in March and April 1976 that there was no consultation within the meaning of Article 16 of the Second Directive. All that the Netherlands Government did was to consult the Commission generally about the draft law which led to the Law of 1968.

2046 On being notified of that draft the Commission could not have inferred that the Netherlands Government intended to continue the previous practice of exempting the cash-on-delivery commission from turnover tax. It may well be imagined that the Commission was not even aware of such a practice.

The first part of this question must therefore be answered in the negative. The second part should be considered in the context of the fourth question.

(d) Fourth Question

— The system of the provisions of the Second Directive and the annexes thereto are of a sufficiently legislative nature for it to be held to have a mandatory effect; this is moreover necessary for the effectiveness of the directive.

— It is apparent from the rules laid down in the said directive that the discretion allowed to the Member States to determine the exemptions which they consider necessary is very restricted and that the consultation expressly provided for by the rules is an essential, if not indispensable, condition and the national court must ascertain in each case, if called upon to do so, whether there has in fact been consultation.

— From this point of view Questions III (b) and IV must be answered in the affirmative. An answer in the negative would be justified only if the words "as far as possible" in Point 10 of Annex A to the Second Directive are interpreted as meaning "provided that in the view of the Member State there is no obstacle thereto from the national point of view". Such an interpretation would really be going too far.

— Questions III (b) and IV make no distinction between services rendered before 1 January 1972 and those rendered after that date. The answer suggested above applies to both cases. Indeed:

(i) the Second Directive did not become applicable only as from 1 January 1972 but, pursuant to Article 191 of the EEC Treaty, upon notification to the Member States. In accordance with Article 1 of the Third Council Directive No 69/463/EEC of 9 December 1969 (Official Journal, English Special Edition 1969 (II), p. 551) the Member States had to adjust their laws to the Second Directive "not ... later than" 1 January 1972;

(ii) the Netherlands introduced value added tax on 1 January 1969; the Netherlands court should therefore decide what effect the absence of consultations regarding Article 6 (2) and Annex B, item 5, to the Second Directive has, including also the effect on services performed before 1 January 1972;

(iii) it is not possible to find that although the wording of Article 11 (j) of the Law of 1968 was the same before and after 1 January 1972 its meaning before that date differed from its meaning thereafter and that therefore the national court is free to interpret a given legal provision variously according to whether the date by which the Member States were required to have adjusted their revenue laws in accordance with the Second Directive was postponed.

2. The Netherlands Government takes the view that the only "ancillary services" within the meaning of Annex B, item 5, to the Second Directive are those which are a necessary adjunct to the transport service, that is to say which are intrinsically linked thereto, such as the loading of goods to be carried and unloading of goods after carriage, and which make a fundamental contribution to the very objective of the carriage (forwarding of goods to a particular destination).

Even if the collection of the sale price by the carrier is an "ancillary service" within the above-mentioned meaning, this does not mean that it cannot from the revenue point of view be treated separately. In particular, the words "as far as possible", used in Point 10 of Annex A to the Second Directive, show that the Member States have a certain discretion as to whether or not to grant exemption in respect of provision of the services listed in Annex B to the Directive. There is nothing to show that such exemption must be restricted to the services so listed.

As to the question of the "consultation" referred to in Article 16 of the Second Directive, it should be observed that the Netherlands Government several times contacted the Commission in 1967 and 1968 to inform it of the developments which had taken place in the sphere of adjusting the law on turnover tax to the provisions of the First and Second Directives. In supplying such information in connexion with the provisions of the Directives of the Council of the European Economic Community of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes the Netherlands Government also intended to fulfil its obligation to consult in connexion with certain provisions. The Commission never let it be known that the correspondence relating to that information did not constitute performance of the obligation to consult: since the consultation did not have to follow any particular form the Netherlands Government fulfilled the obligation in that matter as far as it had to.

3 The observations of the Commission are as follows:

(a) First Question

Community law as contained in Annex B, item 5, to the Second Council Directive No 67/228/EEC of 11 April 1967 intended to govern transport and storage of goods as well as ancillary services strictly connected with such transport or storage. The requisite direct connexion between the transport itself and the ancillary services necessarily prevents the collection of the sale price of the goods by the carrier from being treated as a service ancillary to the transport within the meaning of the aforementioned provisions.

The first question should therefore be answered in the negative. Having regard to that answer, which makes the other questions unnecessary, the latter will be answered subject to that reservation.

(b) Second Question

— The obligation contained in Article 6 (2) to tax the services listed in Annex B to the Second Directive is not absolute. Article 10 (3) allows each Member State, subject to the consultations mentioned in Article 16, to "determine the other exemptions which it considers necessary". The possibility of granting exemptions to which Article 19 refers justifies the provision in Point 10 of Annex A: "Member States shall refrain, as far as possible, from granting exemption from

2048 tax in respect of the provision of the services listed in Annex B".

— In principle, therefore, the ancillary services referred to in Annex B, item 5, are taxable, like transport services and storage of goods, under Article 6 (2). If in relation to turnover tax they had to be treated independently, in a different manner from the transport operations to which they necessarily relate, the very concept of "ancillary services" would lose all meaning and, moreover, the transport of goods by road would distort the conditions of competition between the various modes of transport and in particular at the expense of the railways (cf. Point 19 "Regarding Article 10 (2) and (3)" of Annex A to the Second VAT Directive).

For these reasons the second question should also be answered in the negative.

(c) Third Question

— The consultation referred to in Article 16 of the Second Directive, which under Article 10 (3) is obligatory for Member States wishing to determine exemptions other than those provided for by the Directive, assumes that such Member State shall expressly and precisely give notice of the provision of the Directive which requires the consultation, as well as the proposed law and the Community rule from which such proposed law derogates. In the present case the Netherlands ought to have consulted the Commission under Article 10 (3) of the Second Directive; in fact that Member State merely forwarded to the Commission the draft law and subsequently the law itself, both in their entirety. In these circumstances it might seriously be doubted whether there was proper consultation in the present case within the meaning of Article 16 of the Second Directive.

NEDERLANDSE SPOORWEGEN v STAATSSECRETARIS VAN FINANClËN — The Commission's consent is not required for the adoption by a Member State of measures for which consultation is mandatory. The Commission does not think that the defect of form resulting from the lack of due consultation with the Commission is alone capable of causing the national measure in question to be null and void.

(d) Fourth Question

It follows from the case-law of the Court that it is incompatible with the mandatory character attributed by Article 189 of the Treaty to a directive to prevent interested parties in principle from relying on the obligation arising therefrom (in the present case, Article 6 (2) and Annex B, item 5) before a national court to ascertain whether the responsible national authorities, in implementing the directive, have respected the limits placed by it on their discretion.

After making these observations the Commission proposes that the national court should be answered as follows:

"1. The collection of the sale price of goods is not, in relation to the carriage of those goods, an ancillary service within the meaning of Annex B, item 5, to the Second VAT Directive.

2. In principle, ancillary services must be taxed in the same way as the transport and storage of goods to which they are strictly connected.

3. The consultation provided for in Article 16 of the Second VAT Directive was not duly held in the present case in order to determine other exemptions in accordance with Article 10 (3) of the Directive. Nevertheless, the resulting defect of form does not appear in itself sufficient to involve the nullity of the national measure.

4 The national court must have regard to the mandatory character attributed to the Second Directive and ascertain whether in implementing the obligations imposed by the Directive the national authorities have remained within the limits placed by it on their discretion."

The Commission states that in putting forward the above answers it has not taken into account the fact that the last three questions are asked in the alternative.

Ill — Oral procedure

N.V. Nederlandse Spoorwegen, represented by S. L. Buruma, the Government of the Federal Republic of Germany, represented by A. Deringer and J. Sedemund, and the Commission of the European Communities, represented by its Agent, R. Baeyens, submitted oral observations at the hearing on 20 March 1979.

The Advocate General delivered his opinion on 8 May 1979.

Decision

Grounds

1By judgment dated 24 May 1978, received at the Court Registry on 2 June 1978, the Hoge Raad of the Netherlands referred several questions to the Court for a preliminary ruling under Article 177 of the EEC Treaty on the interpretation of certain provisions of the Second Council Directive No 67/228 /EEC 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 (Official Journal, English Special Edition 1967, p. 16) and more particularly Annex B, item 5, thereto.

2Those questions have arisen in proceedings between the Secretary of State for Finance and a carrier engaged in the transport of goods on a cash-on-delivery basis subject to transport charges and a "cash-on-delivery commission", the latter being increased by turnover tax which it deducts in its tax declarations. The Secretary of State for Finance takes the view that the said commission, as the "collection of moneys payable" must be "exempt from tax" under Article 11 (j) of the Netherlands Law of 28 June 1968 replacing the existing turnover tax by a turnover tax in accordance with the system of value added tax.

3The first question which the national court has put in connexion with that dispute is as follows:

"If a carrier has undertaken, in addition to the transport of the goods, to collect the price of the goods before delivering them to the consignee (cash-on-delivery system) is the collection of that price a service ancillary to the transport within the meaning of item 5 of Annex B to the Second Directive of the Council of the European Communities of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes?"

4To answer this question the objective of the directives on turnover taxes should be recalled, together with the fact that they are based on Articles 99 and 100 of the Treaty which are concerned with the harmonization of the laws of the Member States in the interests of the establishment and functioning of the common market.

5The Council, in the First Directive No 67/227 of 11 April 1967 (Official Journal, English Special Edition 1967, p. 14), had regard to the following facts:

(a) that the main objective of the Treaty is to establish, within the framework of an economic union, a common market within which there is healthy competition and whose characteristics are similar to those of a domestic market;

(b) that the legislation of the Member States involving cumulative multistage taxes were distorting competition and hindering the free movement of goods and services within the common market,

and, after studying the matter, adopted a common system of value added tax for all Member States.

6That system achieves "the highest degree of simplicity and' of neutrality" when the tax is levied in as general a manner as possible and when its scope covers all stages of production and distribution and the provision of services.

7The objective of the first stage of this replacement of cumulative multi-stage tax systems by the common system of value added tax, even if the rates and exemptions are not harmonized at the same time, is the achievement of neutrality in competition in that within each country similar goods bear the same tax burden, whatever the length of the production and distribution chain.

8A Second Council Directive, No 67/228, also of 11 April 1967, drew up a list of services to which Article 6 (2) compulsorily applied' the common system in order to guarantee neutrality in competition between the Member States and to restrict progressively or abolish the differences in question so that the national systems of value added tax might be brought into alignment. That list, which is contained in Annex B to the Directive and is an integral part thereof, has an item 5 worded as follows: "transport and storage of goods, and ancillary services".

9The question therefore is whether in the common system of value added tax made compulsory by that Second Directive in all Member States from 1 January 1972, which is the date on which all Member States had to implement the provisions of the said Directive, the collection of the price of goods carried must or must not be treated as a service ancillary to the carriage of the goods.

10If the contract for the carriage of goods on a cash-on-delivery basis is considered in the light of the aims of the directives on the harmonization of legislations of the Member States concerning turnover taxes, that question must be answered in the affirmative.

11In stipulating that "a carrier has undertaken, in addition to the transport of the goods, to collect the price of the goods before delivering them to the consignee (cash-on-delivery system)", the national court is describing a contract involving two services, the second of which (the cash collection) is so tied up with the first (the carriage) by the intention of the parties that the performance of the two services cannot be separated, for the delivery by the carrier of the goods carried to the consignee can be effected only if the latter pays the price of the goods stipulated by the consignor and in the event of non-payment the carrier may not deliver the goods to the consignee.

12It thus follows from this analysis that since the performance of those two services is inseparable, it is necessary, in order to achieve the objective of neutrality in competition sought by the directives on value added tax, that the collection of the price of goods carried should be treated as a service ancillary to the transport of goods and thus subject to value added tax in all Member States; in this way equality of treatment between the various modes of transport is assured and the same conditions apply to the taxation of the service in all Member States.

13Otherwise, that is to say if the collection of the price of the goods carried were not treated as a service ancillary to the carriage of the goods, each Member State would regain its liberty to tax the cash collection service as an independent service, perhaps even having regard to the mode of transport used.

14The first question therefore should be answered to the effect that if a carrier has undertaken, in addition to the transport of the goods, to collect the price NEDERLANDSE SPOORWEGEN v STAATSSECRETARIS VAN FINANClЁN

of the goods before delivering them to the consignee (cash-on-delivery system) the collection of that price is a service ancillary to the transport within the meaning of Annex B, item 5, to the Second Directive of the Council of the European Communities of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes.

15The following is the second question asked by the national court:

"If so, are the Member States free, in the application of the turnover tax, to treat an ancillary service such as the aforesaid collection of the cash-on-delivery price separately in such a way that the services of transport and storage of goods referred to in item 5 of Annex B are not exempted from turnover tax but the ancillary service of collection of money is so exempted?"

16The answer to the first question based on a consideration of the aims of the directives on value added tax means that the second question must be answered in the negative.

17For the sake of completeness, however, it is necessary to mention Point 10 "Regarding Article 6 (2)" of Annex A, which is worded as follows: "Member States shall refrain, as far as possible, from granting exemption from tax in respect of the provision of the services listed in Annex B". This provision advising the Member States to avoid "as far as possible" granting exemption to the provision of services compulsorily subject to the common system must be interpreted restrictively in order to safeguard the coherence of the new system and the neutrality in competition which it seeks to establish. It follows that a Member State cannot insert into its legislation a measure exempting a service listed in Annex B save in an exceptional case which justifies an adverse effect upon neutrality in competition.

18Since no argument has been advanced to this effect it must be concluded that the ancillary service of collection cannot be exempted from turnover tax since it appears in item 5 of Annex B, which contains the list of services compulsorily taxable under Article 6 of the Second Directive of 11 April 1967.

19That answer also satisfies the fourth question which is asked in the event of the second question being answered in the negative — as is the case — since the fourth question asks whether a national court must take account of Article 6 (2) of the Second Directive in conjunction with the provisions of Annex B, item 5, and that question must therefore be answered in the affirmative.

20The two parts of the third question are essentially concerned with the circumstances in which a Member State must have recourse to the consultation procedure provided for in Article 16 of the Second Directive. That article provides that a Member State is obliged to engage in consultation only in the cases stipulated by the provisions of the Directive.

21No consultation is provided for in the case of application of the combined provisions of Article 6 (2) of the Second Directive and Annex B, item 5. In those circumstances the third question does not call for an answer.

Costs

Costs

22The costs incurred by the Government of the Netherlands, the Government of the Federal Republic of Germany and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Moreover as these proceedings are, in so far as the appellant in the main proceedings is concerned, in the nature of a step in the proceedings pending before the Hoge Raad, the decision as to costs is a matter for that court.

Operative part

On those grounds,

THE COURT

in answer to the questions referred to it by the Hoge Raad by judgment of

24May 1978, hereby rules:

1. If a carrier has undertaken, in addition to the transport of the goods, to collect the price of the goods before delivering them to the consignee (cash-on-delivery system) the collection of that price is a service ancillary to the transport within the meaning of Annex B, item 5, to the Second Directive of the Council of the European Communities of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes.

2. For the purposes of the application of value added tax Member States are not empowered to treat an ancillary service such as the collection of the cash-on-delivery price separately from the service of the transport of goods.

3. The national court must take account of the combined provisions of Article 6 (2) of the Second Directive and of Annex B, item 5, thereto.

Kutscher Mertens de Wilmars Mackenzie Stuart

Pescatore Sørensen O'Keeffe Touffait

Delivered in open court in Luxembourg on 12 June 1979.

A. Van Houtte H. Kutscher

Registrar President

OPINION OF MR ADVOCATE GENERAL REISCHL DELIVERED ON 8 MAY 1979 <appnote>1</appnote>

MrPresident, legislation of Member States concerning Members ofthe Court, turnover taxes — Structure and procedures for application of the common Just as in Joined Cases 181/78 and system of value added tax (Official 229/78 on which I have recently given Journal, English Special Edition 1967, my opinion, the main proceedings giving P. 16).

rise to this case are concerned with the compatibility of the Netherlands Law of 1968 on turnover tax (Wet op de The following are the facts of the case: Omzetbelasting of 28 June 1968, Staatsblad 329) with the Second Council Directive of 11 April 1967 (67/288/ The limited company Nederlandse EEC) on the harmonization of Spoorwegen, the appellant in the main

1 — Translued from the German.

OPINION OF MR ADVOCATE GENERAL REISCHL

DELIVERED ON 8 MAY 1979 ¹

Mr President,

Members of the Court,

Just as in Joined Cases 181/78 and 229/78 on which I have recently given my opinion, the main proceedings giving rise to this case are concerned with the compatibility of the Netherlands Law of 1968 on turnover tax (Wet op de Omzetbelasting of 28 June 1968, Staatsblad 329) with the Second Council Directive of 11 April 1967 (67/288/ EEC) on the harmonization of legislation of Member States concerning turnover taxes — Structure and procedures for application of the common system of value added tax (Official Journal, English Special Edition 1967, P. 16).

The following are the facts of the case:

The limited company Nederlandse Spoorwegen, the appellant in the main action, is an undertaking within the meaning of the Netherlands Law of 1968 on turnover tax engaged in the transport of passengers and goods.

Its subsidiary, the limited companv Van Gend & Loos, with which the appellant is treated as a single entity for tax purposes within the meaning of the Netherlands tax law, engages inter alia in cash-on-delivery transactions for which besides the cost of delivery a special payment is agreed for the collection of the sale price of the goods before their delivery to the consignee. Van Gend & Loos charged this so-called cash-on-delivery commission, plus value added tax, to its principals' account and included the tax in its own tax declaration. The appellant did not make a return of these collections as services within the meaning of Article 11 of the Netherlands Law on turnover tax and claimed deduction of input tax under Article 15 (1) of that law.

The Netherlands tax authorities levied this input tax which had been deducted amounting to Hfl 467076 in respect of the period from 1970 to 1974 inclusive on the ground that the collection of the sale price was a service which was separate from the carriage of the goods. Accordingly it is a service within the meaning of Article 11 (j) of the Netherlands Law of 1968 on turnover tax, which exempts ‘the granting of credit; the transfer, collection and payment of financial obligations including bank transfers, cheques and current account transactions’ from turnover tax.

The appellant challenged this assessment before the Tariefcommissie and claimed that the collection of cash on delivery was a service ancillary to the carriage of goods within the meaning of the Second Council Directive on the harmonization of turnover taxes and therefore had to be taxed in the Netherlands. In support it relied on Article 6 (2) of that directive which reads:

‘The rules laid down in this Directive as regards the taxation of the provision of services shall be compulsorily applicable only to services listed in Annex B;’

and in this connexion Annex B, item 5, lists the following services:

‘Transport and storage of goods, and ancillary services.’

Further, the appellant referred to Point 10 ‘Regarding Article 6 (2)’ of Annex A to the directive which provides:

‘Member States shall refrain, as far as possible, from granting exemption from tax in respect of the provision of the services listed in Annex B.’

The Tariefcommissie rejected the appeal inter alia on the ground that the power given to the Member States in Point 10 of Annex A excluded reliance on Article 6 (2) of the directive and that therefore Article 11 (j) of the Netherlands Law on turnover tax could not infringe that directive. The question whether collection of the sale price could be regarded as an ancillary service within the meaning of Annex B, item 5, to the Second Directive was therefore left open. Further, the Tariefcommissie observed that in any event there could be no reliance on the Second Directive in respect of the period prior to 1 January 1972 because the directive entered into force only on that date.

The appellant in the main action appealed against that decision of the Tariefcommissie to the Hoge Raad of the Netherlands. In support it alleged that the Tariefcommissie had wrongly held that the directive was not directly applicable. The words ‘as far as possible’ used in Point 10 ‘Regarding Article 6 (2)’ of Annex A to the Second Directive did not mean that the Member States have a discretion to exempt the transport and storage of goods and ancillary services or pan thereof from turnover tax. If it is assumed that the collection of the sale price is a service ancillary to the carriage of goods within the meaning of the directive, then although Article 10 (3) of the Second Directive, which allows every Member State, subject to the consultations provided for in Article 16, to determine such other exemptions as it considers necessary, offers the possibility of exempting the collection of that price from turnover tax, the Netherlands have neither put forward valid grounds nor engaged in the requisite consultations. Moreover, the Tariefcommissie wrongly assumed that the Second Directive could not be relied on in respect of the period before 1 January 1972.

By judgment dated 24 May 1978 the Hoge Raad stayed the proceedings and referred the following questions to the Court for a preliminary ruling under Article 177 of the EEC Treaty:

If a carrier has undertaken, in addition to the transport of the goods, to collect the price of the goods before delivering them to the consignee (cash-on-delivery system) is the collection of that price a service ancillary to the transport within the meaning of item 5 of Annex B to the Second Directive of the Council of the European Communities of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes?

If so, are the Member States free, in the application of the turnover tax, to treat an ancillary service such as the aforesaid collection of the cash-on-delivery price separately in such a way that the services of transport and storage of goods referred to in item 5 of Annex B are not exempted from turnover tax but the ancillary service of collection of money is so exempted?

If the answer to Question II is in the affirmative, can the exchange of letters between the Netherlands Government and the European Commission referred to in the opinion of Mr Advocate General Van Soest be regarded as the consultation referred to in Article 16 of the Second Directive?

If not must the national court before which it is claimed that no consultation took place take account of this?

If Question II is answered in the negative, must a national court before which Article 6 (2) of the Second Directive in conjunction with the provisions of item 5 of Annex B is invoked take account of this?’

My opinion on these questions is as follows:

1The Hoge Raad asks in the first question whether the collection of the price of goods by the carrier before their delivery to the consignee is a service ancillary to the transport and storage of goods within the meaning of Annex B, item 5, to the Second Council Directive.

The appellant takes the view that the collection of a debt in connexion with the carriage of goods has become a typical ancillary service in relation to carriage. This is already apparent from the practice in the Netherlands where the collection of cash debts takes place to any appreciable extent only in connexion with delivery services. This conclusion is also supported by the fact that the charges for the collection of accounts by transport undertakings, as determined by the Transport Minister, are substantially less-than the charges which banks can make for such transactions, although it is true that banks are not very active in this field. Moreover, the prevalent opinion in civil law is that the collection clause is an integral part of the contract of carriage and that the contract of carriage with a cash-on-delivery clause is an extension of the normal contract of carriage. Therefore it cannot be accepted that the revenue court should interpret the revenue laws differently and add a further doctrine to the prevalent principle of civil law. Therefore the exemption contained in Article 11 (j) of the Netherlands Law on turnover tax is relevant only to normal collection activities and not to collection transactions connected with other activities. Moreover, it seems that cash collection within the European Communities is exempt from turnover tax only in the Netherlands. This fact is apparent from a questionnaire conducted by the Commission. On the basis of that investigation and an independent inquiry it is apparent that the majority of the Member countries treat collection on delivery as a service ancillary to transport. On the wording of the directive itself the appellant takes the view that for example charges for loading and unloading and similar services must be treated as pan of the transport service itself and that therefore the Community legislature meant something quite different by ancillary service, such as for example cash collection.

The Commission and the Netherlands Government, on the other hand, take the view that the collection of the sale price by the carrier is not to be treated as a service ancillary to the carriage of goods. Both stress that only those services may be treated as ancillary within the meaning of Annex B, item 5, to the Second Council Directive which are necessarily closely related to the carriage and contribute to the latter in a special way.

I think it will be necessary to adopt this last view. In this respect I should first like to recall that the concept of ancillary service in question is taken from Community law and therefore according to the established case-law of the Court must be interpreted according to uniform criteria in order not to jeopardize the equal application of Community law. In my view the wording shows that the concept of ancillary service covers only such services as are not simply in any kind of relationship to the main service but cannot reasonably be performed in its absence. These include special payments, such as those for loading and unloading, any refrigeration, counting, weighing or repacking of goods. In my view the Council intended to apply the general concept of ancillary services to these kinds of service which are not as such transport or storage of goods but are necessarily closely connected thereto. I do not find convincing the appellant's argument to the effect that such kinds of service are part of the carriage itself and that in consequence the concept of ancillary services must cover completely different services.

Cash-collection transactions are not so closely related to the essence of the carriage of goods that they can be treated as a service ancillary thereto. On the contrary, they are services which intrinsically have nothing to do with the carriage of goods and therefore could just as well be carried out separately but for the sake of simplicity are performed in connexion with the delivery of the goods. This must also be the reason why under the Netherlands rules the charges made by carriers for collection on delivery are less than the charges arising from collection by banks.

Moreover, it cannot depend on the civil law principle followed in the individual Member States since, on the one hand, the revenue treatment of a matter is distinguishable from its civil law treatment and, on the other, the civil law principle may vary from country to country, which would lead to a varied interpretation of a concept of Community law.

Finally, the interpretation which I propose is not affected by the comparative examination of taxation practice in the Member States undertaken by the appellant. Its conclusions would be evidence of the intention of the draftsmen of the directive only if it were conclusively shown that all the Member States treated collection on delivery by the carrier as a service ancillary to transport within the meaning of Annex B, item 5, to the Second Council Directive. I cannot see this from the documents before us, quite apart from the fact that they largely originate from private and not official sources.

Since, therefore, I come to the conclusion that the first question must be answered in the negative, I need with the requisite brevity discuss the remaining questions only in the alternative.

2The national court asks in the second question whether, assuming that collection of the price is a service ancillary to the carriage of goods, the collection alone and not the carriage or storage of goods can be exempted from taxation by a national law.

Tax exemption of such an ancillary service assumes first of all that having regard to the services listed in Annex B, item 5, to the Second Council Directive Member States can in fact derogate from the provisions of the directive.

The appellant takes the view that in spite of the possibility provided for in Article 10 (3) of the Second Council Directive for the Member States to grant exemptions, because of Point 10 of Annex A to that directive, which provides that the Member States shall refrain, as far as possible, from granting exemptions in respect of the provision of the said services, there is in practice no scope to derogate from the directive in this respect. This is particularly clear in the French version, which uses the words ‘dans toute la mesure du possible’.

Moreover, there is nothing in the legislative procedure to indicate that the Netherlands considered such exemption necessary. On the contrary, it is apparent that all that was intended was to retain a practice which had obtained under the old law. Finally, it has also to be considered that exemption of the cash-on-delivery commission from turnover tax only in the Netherlands would lead to distortion of competition.

The existence of Article 10 (3) of the directive is evidence that the obligation contained in Article 6 (2) of the directive to tax the provision of services listed in Annex B is not absolute. Regarding Article 10 (2) and (3), Point 19 of Annex A provides that where those paragraphs are applied to the transport services referred to in Annex B, item 5, they must be so applied as to ensure equality of treatment as between the different modes of transport. From this it is clear that subject to the consultations provided for in Article 16 every Member State may under Article 10 (3) of the directive derogate also from the taxation of the provision of services prescribed in Article 6 (2) of the directive if it considers such exemption necessary.

If it is assumed, however, as in the second question, that collection of the price by the carrier is an ancillary service within the meaning of the said directive, then the very existence of Article 11 (j) of the Netherlands Law of 1968 on turnover tax shows that the Netherlands intended to derogate from the rule laid down by the directive. There can therefore be no question of whether that provision simply intended to maintain a practice which was current under the old law.

The second question then arises as to whether in the said circumstances if a Member State makes no use of the possibility of granting exemption in respect of the main service it may nevertheless derogate from the directive only in respect of such an ancillary service.

Following my observations to the first question I join here with the Commission in thinking that the meaning and purpose of the concept of ancillary service in Annex B, item 5, show that those ‘contingent’ services have to be taxed in the same way as the main service. If in respect of turnover tax the ancillary services could be treated differently from the carriage to which they necessarily extend, the concept of ancillary service would then lose all meaning for the ancillary services would have to be treated as if they were completely inaependent of the main service. Since this would be incompatible with the system of value added tax under Community law, the second question has to be answered in the negative.

3The third question, on the requirement of consultation under Article 16 of the Second Directive and the consequences of insufficient consultation on the application of national law, can again be dealt with only in the alternative, since it is asked only in the event of the second question being answered in the affirmative. The content of the third question is basically the same as Questions 3 and 4 which the Hoge Raad asked in Joined Cases 181/78 and 229/78; the arguments of the parties are likewise the same. In this respect I can therefore refer to my opinion in the said cases. In the present case it is apparent especially from the letter to the Commission of 16 July 1968 from the Permanent Representative of the Kingdom of the Netherlands to the European Communities that there was no consultation in respect of the provision in question of Article 11 (j) of the Netherlands Law on turnover tax. That letter, communicating to the Commission the Law on turnover tax which had already appeared in the official gazette of the Netherlands, expressly lists the articles of the Netherlands law which the Netherlands Government considers require consultation. Article 11 (j) is, however, not contained in that list.

4With the fourth question the national court seeks to ascertain whether a party before the national courts may rely directly on Article 6 (2) in conjunction with Annex B, item 5, to the Second Council Directive. This question is asked only in the event of the collection of the price being treated as a service ancillary to the carriage within the meaning of Annex B, item 5, to the Second Council Directive and of the Member States not having a discretion under that directive of exemption from turnover tax only the ancillary service of collecting the price and not the transport and storage of the goods. Since I have come to the latter conclusion in answering the second question, if only in the alternative, it seems proper to make some brief remarks on this question.

The appellant takes the view that Article 6 (2) of the Second Council Directive has direct effect in the sense that it gives individuals rights which the national courts must respect. In its view, contrary to that of the Tariefcommissie, the directive took effect not from 1 January 1972 but as soon as it was communicated to the Member States.

I have already, discussed the question of when the Second Council Directive took effect in my opinion in Joined Cases 181/78 and 229/78 and I would refer thereto.

As regards the direct applicability of the directive itself, the established case-law of the Court, beginning with its judgment of 6 October 1970 in Case 9/70 Franz Grad v Finanzamt Traunstein [1970] 2 ECR 825, has recognized that directives, which pursuant to the third paragraph of Article 189 of the EEC Treaty are addressed only to States, may in certain circumstances have direct effects in the legal relationships between the Member States and individuals. This is, according to the case-law, always provided that the obligation imposed on the Member States by the directive is clear and unambiguous, is unconditional and in particular leaves the addressee no discretion in respect of its translation into national law. However, as I have indicated in discussing the second question, the provisions of Article 10(3) of the directive and of Points 10 and 19 of Annex A thereto show that the Member States have a discretion, albeit limited, regarding the granting of exemptions from taxation in respect of the provision of services which in principle have to be taxed pursuant to Article 6 (2). As the Court has expressly declared, inter alia in its judgment of 1 February 1977 in Case 51/76 Verbond van Nederlandse Ondernemingen v lnspecteur der Invoerrechten en Accijnzen [1977] 1 ECR 113, the exercise of such discretion is not subject to review by the Court. However, as the Court made clear in the said judgment, it follows from the binding effect attributed to a directive that it is for the national courts to determine whether a disputed national measure exceeds the limits of the discretion given to the Member States.

I accordingly propose that the question should be answered as follows:

The collection of the price of goods is not a service ancillary to the transport within the meaning of item 5 of Annex B to 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 (No 67 /228/EEC).

¹ Translued from the German.