C-276/91 Commission v France

Judgment of the Court of 2 August 1993. - Commission of the European Communities v French Republic. - Penalties for infringement of VAT legislation - Disproportionate nature. - Case C-276/91. European Court reports 1993 Page I-04413

Summary Parties Grounds Decision on costs Operative part

++++

Tax provisions ° Harmonization of laws ° Turnover tax ° Common system of value added tax ° National system of penalties for tax evasion ° Differentiation between importation and domestic system ° Whether permissible ° Condition ° Difference between penalties not to be disproportionate

(EEC Treaty, Art. 95; Council Directive 77/388)

Although the Member States are not required to have the same systems of penalties for offences relating to value added tax payable on importation and for offences relating to the same tax in connection with transactions within the country, since the two categories of offence cannot be equally easily detected, the degree of difficulty in detecting an offence cannot justify a manifest disproportion in the severity of the penalties laid down for the two categories of offence. Such disproportion arises, thus constituting a failure to fulfil the obligations arising from Article 95 of the Treaty, where offences committed on importation give rise to the confiscation of the goods in respect of which the offence was committed and a fine equivalent to the value of those goods or up to twice that amount, whereas offences under the domestic system are punishable only by a fine proportionate to the amount of tax evaded.

In Case C-276/91,

Commission of the European Communities, represented by Johannes Foens Buhl, Legal Adviser, acting as Agent, with an address for service in Luxembourg at the office of Nicola Annecchino, of its Legal Service, Wagner Centre, Kirchberg,

applicant,

v

French Republic, represented by Philippe Pouzoulet, Deputy Director of the Directorate for Legal Affairs at the Ministry of Foreign Affairs, and Jean-Louis Falconi, Secretary for Foreign Affairs at the same Ministry, acting as Agents, with an address for service in Luxembourg at the French Embassy, 9 Boulevard du Prince Henri,

defendant,

APPLICATION for a declaration that, by introducing and applying provisions of law, regulation or administrative action in force under Article 414 of the French Customs Code, which penalize offences concerning the payment of value added tax on importation from another Member State more severely than those concerning the payment of value added tax on domestic transactions, the French Republic has failed to fulfil its obligations under Article 95 of the Treaty establishing the European Economic Community,

THE COURT,

composed of: G.C. Rodríguez Iglesias, President of Chamber, acting for the President, M. Zuleeg and J.L. Murray (Presidents of Chambers), G.F. Mancini, R. Joliet, F.A. Schockweiler, J.C. Moitinho de Almeida, F. Grévisse and D.A.O. Edward, Judges,

Advocate General: C.O. Lenz,

Registrar: D. Louterman-Hubeau, Principal Administrator,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 13 January 1993,

after hearing the Opinion of the Advocate General at the sitting on 17 February 1993,

gives the following

Judgment

Grounds

1By application lodged at the Court Registry on 25 October 1991, the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that, by introducing and applying provisions of law, regulation or administrative action in force under Article 414 of the French Customs Code, which penalize offences concerning the payment of value added tax on importation from another Member State more severely than those concerning the payment of value added tax on domestic transactions, the French Republic has failed to fulfil its obligations under Article 95 of the Treaty.

2The French legislation provides for two systems of penalties for offences concerning value added tax. The first, which applies to offences relating to transactions within the country, involves fiscal penalties and criminal penalties. The second, which applies to offences committed on the importation of certain goods into national territory, involves criminal penalties only.

3In the case of offences relating to domestic transactions, Article 2(2) of Law No 87-502 of 8 July 1987 amending fiscal and customs procedures (Journal Officiel de la République Française of 9 July 1987, p. 7470) (hereinafter "the Law of 8 July 1987") provides for a fiscal penalty in the form of a 10% surcharge on the amount due, which rises to 40% after a first demand for payment and 80% after a second. Articles 1741 and 1750 of the General Taxation Code also provide for criminal penalties: a fine of between FF 5 000 and FF 250 000, a term of imprisonment from one to five years and, where appropriate, suspension of the offender' s driving licence for not more than three years.

4For offences committed on the importation of heavily taxed goods, which, at the relevant date, included cars, then subject to a VAT rate of 33 %, Article 414 of the Customs Code lays down criminal penalties, namely the payment of a fine equal to the value of the goods in respect of which the offence was committed or up to twice that amount, the confiscation of the goods and imprisonment for a maximum of three years. In addition, pursuant to Article 2 II of the Law of 8 July 1987, such offences may be the subject of a compromise entailing the payment, for each month of delay, of 5% of the VAT evaded where the tax is paid after a delay of between three and 16 months, and 80% where the tax is paid after a delay of more than 16 months.

5The action in this case was brought as the result of proceedings between a Belgian national, Mrs Patron, and the French customs authorities. She was alleged by the latter to have used in France her private car, which was registered in Belgium, without paying VAT although, according to the customs authorities, she normally resided in France. Mrs Patron refused the compromise she was offered, and was ultimately ordered to pay a fine which, in view of the substantial mitigating circumstances in her favour, was fixed at FF 22 000 for the customs offence of importing a car without making a declaration, and the vehicle was confiscated.

6By letter of 27 April 1989, the Commission informed the French Government that it considered the penalties laid down by Article 414 of the Customs Code to be contrary to Article 95 of the Treaty in two respects. First, they were more severe than the penalties for offences in connection with transactions within the country and such difference was disproportionate to the dissimilarity between the two categories of offence (Case 299/86 Drexl [1988] ECR 1213). Secondly, those penalties failed to take account of the residual portion of the VAT paid in the State of exportation, contrary to the principle laid down by the Court in the judgments in Case 15/81 Gaston Schul, Douane Expediteur v Inspecteur der Invoerrechten en Accijnzen [1982] ECR 1409, and Case 47/84 Staatssecretaris van Financiën v Gaston Schul Douane-Expediteur [1985] ECR 1491.

7On 26 July 1990, since it had received no reply from the French Government, the Commission sent it a reasoned opinion in which it reiterated the complaints set out in the letter of formal notice and requested the French Government to take the measures necessary to comply with the opinion within two months.

8There was no response to that request either. The Commission, by application of 25 October 1991, therefore brought this action for failure to fulfil Treaty obligations.

9Reference is made to the Report for the Hearing for a fuller account of the national legislation in question, the course of the procedure and the pleas in law and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

10In view of the form of order sought in the application, it should be observed that the purpose of the action is essentially to obtain a declaration that, by introducing and applying, under Article 414 of the Customs Code, a system of penalties for offences concerning the VAT due on importation which is more severe than the system of penalties laid down elsewhere for offences concerning the payment of VAT on domestic transactions, the French Republic has failed to fulfil its obligations under Article 95 of the Treaty.

11The French Government states, first, that since the material events the harmonization of VAT rates decided upon at Community level has led to the disappearance of the category of heavily taxed goods within the meaning of Article 414 of the Customs Code. On this point it refers to Article 11 of Law No 91-716 of 26 July 1991, which in fact provides for the final abolition of the higher rate of VAT as from 1 January 1993.

12In reply to that argument, it is sufficient to observe that, as the Court has consistently held, the subject-matter of an action under Article 169 is determined in the Commission' s reasoned opinion and that, even where the default has been remedied after the period prescribed by the second paragraph of that article, there is still an interest in pursuing the action (see the judgment in Case 39/72 Commission v Italy [1973] ECR 101, paragraph 9).

13In answer to the Commission' s complaint concerning the disproportion between penalties, the French Government goes on to say that, pursuant to Article 95 of the Treaty as interpreted by the Drexl judgment, cited above, the Member States are not obliged to lay down identical systems of penalties for offences concerning the VAT due on importation and for offences connected with VAT on transactions within the country. In this case, the penalties for the latter offences are less severe than the penalties for those concerning the VAT due on importation because they may be detected more easily by reason of the obligations to be fulfilled by taxable persons. In the framework of the domestic system, the seller of a vehicle is required to draw up a whole series of documents which enable the tax authorities to detect tax evasion whereas, in the framework of the system for VAT on importation, crossing the border is the only act in the course of which evasion may be detected and the offender identified.

14On this point it must be confirmed that the Member States are not required to have the same system of rules for the two categories of offence since they cannot be equally easily detected.

15However, as the Court stressed in the Drexl judgment, cited above, the degree of difficulty in detecting an offence cannot justify a manifest disproportion in the severity of the penalties laid down for the two categories of offence.

16Consequently it is necessary to ascertain whether, in this case, such difference is manifestly disproportionate.

17In that respect the French Government states that the criminal penalties laid down by Articles 1741 and 1750 of the General Taxation Code for offences connected with the VAT due on a transaction within the country are comparable with the criminal penalties laid down by Article 414 of the Customs Code for offences relating to the VAT due on importation.

18That argument cannot be upheld.

19Failure to declare the importation of goods and to pay the VAT arising is, as such, made a criminal offence without the need to prove fraudulent intent and, under Article 414 of the Customs Code, the penalty is a fine equal to the value of the goods or up to twice that amount, the confiscation of the vehicle and imprisonment for a maximum of three years. That provision in fact refers to "any act of importing ... without declaration".

20By contrast, in the framework of the internal system, mere failure to declare a transaction subject to VAT entails the payment of default interest and a surcharge equivalent to 10% of the tax due, 40% after a first demand for payment and 80% after a second demand for payment. Only if the national authorities can show that the act was accompanied by fraudulent intent on the part of the offender does it constitute a criminal offence punishable by a fine of between FF 5 000 and FF 250 000, a term of imprisonment of between one and five years and, where appropriate, suspension of the offender' s driving licence for a maximum of three years, pursuant to Articles 1741 and 1750 of the General Taxation Code.

21Therefore the threshold at which criminal penalties are imposed is lower in the case of an offence concerning the VAT payable on importation than in relation to the VAT payable on transactions within the country.

22Consequently, the criminal penalties laid down by Article 414 of the Customs Code, which do not require fraudulent intent, must be compared with the fiscal penalties laid down by the Law of 8 July 1987, which likewise do not require fraudulent intent.

23The comparison shows that the provision for confiscation of the goods in respect of which the offence was committed does not exist in the case of the corresponding internal offence. Furthermore, the fine which is automatically imposed in addition to confiscation is equivalent to the value of the undeclared goods or up to twice that amount whereas, in the case of the corresponding internal offence, it is proportionate to the amount of the tax evaded. The disproportion between the severity of the penalties applicable to offences concerning the VAT payable on importation, on the one hand, and those relating to the VAT payable on domestic transactions, on the other, is therefore manifest.

24With regard to this complaint, the French Government adds that, for offences committed on the importation of vehicles, Article 350 of the Customs Code empowers the customs authorities to effect a compromise and that the amount payable as a result is similar to the fiscal penalties applicable to offences committed in the course of transactions within the country.

25On this point it is sufficient to reply that that option, which is a matter for the discretion of the authorities, is not sufficient to remedy the failure to fulfil obligations arising from Article 414 of the Customs Code. As the Court has consistently held, the incompatibility of a national provision with the provisions of the Treaty can be remedied only by means of binding internal provisions (Case 239/85 Commission v Belgium [1986] ECR 3645, and Case 257/86 Commission v Italy [1988] ECR 3249).

26Finally, the Commission' s second complaint must be examined. As already stated in paragraph 6, the Commission claims that Article 95 of the Treaty is also infringed by the fact that the fine laid down by Article 414 of the Customs Code does not take account of the residual portion of the VAT which was paid in the Member State of exportation and is still incorporated in the value of the goods at the time of importation, so that such residual VAT still forms part of the taxable amount and is not deducted from the VAT payable on importation.

27In that connection it must be emphasized that a system whereby the amount of the fine depends on the value of the goods fails ex hypothesi to take account of the residual portion of the VAT paid in the Member State of exportation.

28Regard being had to the foregoing considerations, it must be declared that, by introducing and applying, under Article 414 of the French Customs Code, a system of penalties for offences concerning the VAT due upon importation from another Member State which is more severe than the system of penalties laid down elsewhere for offences concerning the payment of VAT on domestic transactions, the French Republic has failed to fulfil its obligations under Article 95 of the Treaty.

Costs

Costs

29Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the French Republic has been unsuccessful, it must be ordered to pay the costs.

Operative part

On those grounds,

THE COURT

hereby:

1. Declares that by introducing and applying, under Article 414 of the French Customs Code, a system of penalties for offences concerning the VAT due upon importation from another Member State which is more severe than the system of penalties laid down elsewhere for offences concerning the payment of VAT on domestic transactions, the French Republic has failed to fulfil its obligations under Article 95 of the Treaty;

Signatures

2. Orders the French Republic to pay the costs.

OPINION OF ADVOCATE GENERAL

LENZ

delivered on 17 February 1993 ( *1 )

Mr President,

Members of the Court,

A — Introduction

1The background of this action for failure to fulfil obligations under the Treaty is the common system of value added tax regulated by the Sixth Directive ¹ in the version in which importation (meaning the physical entry of a product) from another Member State was a chargeable event. ² The Commission alleges that the French Republic has adopted and applied, in Article 414 of the French Customs Code, a system of penalties for offences against the legislation concerning value added tax on importation which, in certain respects, is incompatible with Article 95 of the EEC Treaty. Article 414 of the Customs Code is worded as follows: ‘Any act of smuggling and any act of importing or exporting without declaration where such offences relate to goods in the category of those which are ... heavily taxed within the meaning of this Code shall be punishable by a maximum of three years' imprisonment, confiscation of the undeclared goods, confiscation of the means of transport, confiscation of articles used to conceal the fraud and a fine equal to the value of the undeclared goods or up to twice that amount.

Offences relating to goods ... the value of which does not exceed FF 5000 shall be punishable by a fine equal to the value of such goods.’

2The Commission's action was prompted by a particular case in which that provision was applied and in which the Cour d'Appel, Amiens on appeal imposed a fine of FF 20000 on a Belgian national, Mrs Yetta Patron, and ordered the confiscation of her car, which was registered in Belgium. According to that judgment, ³ in 1983 Mrs Patron imported her car into France, where she resided at the time, without making the necessary declaration. Article 414 of the Customs Code was applied because the imported vehicle was liable to value added tax of 33% and was therefore ‘heavily taxed’ within the meaning of that provision.

3In its application, the Commission raises two complaints on the basis of Article 95 of the EEC Treaty.

4The first complaint relates to the fact that offences against the value added tax provisions for domestic transactions do not fall within Article 414 of the Customs Code, but are penalized under a special system of penalties. I refer to the Report for the Hearing ⁴ for the features of this system, as set out by the provisions submitted by the defendant Member State.

5In this connection the Commission considers that Article 414 is incompatible with Article 95 of the Treaty because it is contrary to the principle laid down in the Drexl judgment. ⁵ In that judgment the Court ruled as follows:

‘National legislation which penalizes offences concerning the payment of value added tax on importation more severely than those concerning the payment of value added tax on domestic sales of goods is incompatible with Article 95 of the EEC Treaty in so far as that difference is disproportionate to the dissimilarity between the two categories of offences.’

6According to the Commission's second complaint, the said Article 414 contains no provision which ensures the application of the principles set out in the Gaston Schul judgment. ⁶ In the particular case of Mrs Patron, the Commission states that, according to those principles, the value added tax paid in the Member State of exportation must be taken into account in fixing the fine on the basis of the value added tax payable.

7In the reply, the Commission again claims that, in the particular case of Mrs Patron, the penalty imposed was disproportionate to the tax owed. Moreover, Mrs Patron denied that she was resident in France. On this point it should be observed that, where persons have dual residence, several factors have to be taken into account for determining the Member State in which a vehicle must be registered and taxed. In this connection the Commission refers to Article 7(1) of Directive 83/182 ⁷ and the related judgment in the Ryborg case. ⁸

8The Commission claims that the Court should:

declare that by introducing and applying the provisions of law, regulation or administrative action in force under Article 414 of the French Customs Code, which penalize offences concerning the payment of value added tax on importation from another Member State more severely than those concerning the payment of value added tax on domestic transactions, the French Republic has failed to fulfil its obligations under Article 95 of the EEC Treaty; and

order the French Republic to pay the costs.

The French Government contends that the Court should:

declare the application unfounded, and

order the applicant to pay the costs.

9The French Government regards the Commission's complaints as unjustified, and takes the view that certain arguments in the reply are out of time.

B — Analysis

I. Complaint that Article 414 of the Customs Code infringes the principle laid down in the Drexl judgment

10To examine this complaint properly, first a few observations on the principle developed in the Drexl judgment are called for, and then it will be necessary to determine the precise scope of the Commission's complaint.

111.In the Drexl case the Court examined two systems of penalties, one for offences on importation and the other for offences in relation to domestic transactions, which differed with regard to the nature and severity of the penalties. ⁹ As in the present case in relation to ‘heavily taxed’ goods, the system applying to importation was laid down in the provisions on smuggling.

12In view of that situation the Court had to reconcile two principles: the principle that the Member States are responsible for criminal penalties ¹⁰ and the principle laid down by Article 95 of the Treaty that internal taxation must be neutral in relation to intra-Community trade.

13In this connection the Court regarded certain differences in the penalties as permissible (paragraph 22 of the judgment):

‘The two categories of offences in question are distinguished by different circumstances concerning both the constituent elements of the offence and the greater or lesser extent of the difficulty of detecting it. Value added tax on importation is charged simply when the goods actually enter the territory of the Member State concerned, rather than on a transaction. These differences mean, in particular, that the Member States arc not required to have the same system of rules for the two categories of offences.’

14However, the Court did not consider there was any justification for the difference in the severity of the penalties for the two categories of offence, which was disproportionate to the dissimilarity between the two categories. ¹¹

15Therefore the discretion left to the Member States has two characteristics. First, with regard to the chargeable event for value added tax, the Member States may lay down a different system of penalties for offences on importation, that is, a system which links up with the provisions on smuggling (in the sense of evading import duties). Secondly, the Member States may provide for penalties of differing severity because offences against the value added tax provisions on importation are generally more difficult to detect than offences relating to domestic transactions.

16The limits set by the Court to the Member States' discretion with regard to the framing of criminal legislation ¹² also relate to the severity of the respective penalties. In view of those limits the Member States are prohibited from infringing the requirement of equal treatment, for tax purposes, of domestic transactions and import operations by laying down for the latter such severe penalties that the difference in penalties no longer matches the difference between the two categories of offence. In this situation the greater severity of the penalties for offences on importation would appear not only as a response to the greater difficulty of detecting such offences, but also (at least in part) as an unacceptable obstacle to imports.

17In the grounds of judgment, the Court clarified ¹³ the prohibition thus imposed on the Member States by saying that it must amount to a manifest disproportion in the severity of the penalties.

In my view, this clarification is not so much the result of weighing the Member States' interest in the framing of their criminal legislation against the Community's interest in safeguarding the fundamental freedoms and the smooth functioning of the common system of value added tax. ¹⁴ It is explained rather by the fact that a ‘disproportion’ in the abovementioned sense cannot in general be established with mathematical precision. Let me demonstrate this with the following questions:

How great are we to regard the difference between the two categories of offence as far as the possibility of detection is concerned?

How much weight is to be attached to such difference when specifying the penalties?

Therefore, what should be the nature and degree of the differences between the penalties without their being disproportionate in relation to the differences between the two categories of offence?

18The task of establishing the existence of a disproportion may be made more difficult if the systems of penalties are not structured in the same way, as is the case here and as was also the case in Drexl.

19Finally, on the basis of these considerations it is also possible to determine how to compare the two systems of penalties in order to throw light on any disproportion as defined above. Such clarification also seems to me necessary to enable the Commission's specific complaint to be examined.

20In this connection it should be observed that the systems in question here arc differently structured. In this case the comparison must take account of all the essential elements of both systems, so far as possible and necessary by contrasting comparable factors (normal penalty and severer penalties, penal-tics for attempted offences, rules for minor offences, incidental consequences [confiscation] and the like). Where the differences are particularly glaring, as in relation to the financial penalties or terms of imprisonment normally imposed, it may be sufficient to have regard to these. ¹⁵ Otherwise all the said elements must be balanced against one another. ¹⁶

212. Now that we have clarified the criterion which must, according to the Drexl judgment, be applied, we must define the complaint which the Commission bases on that judgment.

22In this connection it should be observed that the only object of the Commission's criticism is the provision for confiscation laid down by Article 414 of the Customs Code, for which there is said to be no counterpart in the provisions concerning penalties for domestic transactions. The similar terms of the letter of formal notice, ¹⁷ the reasoned opinion, ¹⁸ and the application ¹⁹ all lead to this interpretation of the complaint. The argument in the reply might have given rise to doubt concerning this interpretation. Some of the considerations put forward there might create the impression that the Commission objects to the entire system laid down by Article 414 of the Customs Code because it provides for more severe penalties than does the system for offences relating to domestic transactions. ²⁰ However, apart from the fact that in this connection the Commission has merely alleged a disproportion in that more comprehensive sense, without giving a detailed explanation, it replied as follows to a question from the Court:

‘In this case the Commission questions whether the defendant State has power, when checking the recovery of value added tax on the importation of goods from other Member States, to order penalties of confiscation of the imported goods if such penalties are not provided for in the system of penalties for offences relating to value added tax within the country.’ ²¹

23As the threat of confiscation as a penalty bears no relation to the penalties in connection with domestic transactions, it is said, it creates a manifest disproportion between the penalties laid down for the two categories of offence. ²²

24The Commission adds that it did not

‘wish to complain generally of any difference in treatment, as regards penalties, which France may provide for, depending on whether the offences are committed on importation or within the country, although any such difference cannot be justified merely by the fact that the offence is connected with the importation of goods and not a domestic transaction’. ²³

25Finally, the Commission observes that, although the penalties may be on a sliding scale so as to take account of the different circumstances of offences and the difficulty of detecting some of them, there is no justification for the retention in an internal market of two provisions which are totally independent of each other and which lead to entirely different treatment according to whether the offence was committed on importation or within the country. ²⁴

26All in all, these parts of the reply to the Court's question confirm what is already clear from the Commission's application and the documents in the pre-litigation procedure, namely that the Commission wishes to complain (only) of the power of confiscation laid down by Article 414 of the Customs Code, although it is clear that the existence of two independent systems of penalties causes it some disquiet.

273. The complaint, as clarified above, must now be examined in the light of the principles of the Drexl judgment which have already been set out. ²⁵

28In my view, the action with regard to this complaint should be dismissed. As follows from my observations ²⁶ concerning a comparison of different systems of penalties, in principle it is not sufficient to allege that there is a difference in one particular respect. On the contrary, a disproportionate difference within the meaning of the Drexl judgment can in general be found to exist only by means of a comprehensive comparison of the two systems. From this point of view, the Commission's complaint does not by its very nature meet the criterion laid down by the abovementioned judgment.

29However, it would have been necessary to take a different approach if, in its complaint, the Commission had made a comparison of the other elements of the two systems of penalties with the object of showing that both systems are fundamentally equally severe, ²⁷ apart from the penalty of confiscation. On that basis it would then have been necessary to consider whether the Commission's comparison was correct in its method and its result and, if so, whether the penalty of confiscation creates a (manifest) disproportion as it is provided for only in the case of importation.

30However, the application does not contain even a rudimentary argument concerning a comparison as described above. In this connection it is characteristic that the relevant provisions on the penalties for offences in relation to domestic transactions were received only with the defence, together with the reference to Article 350 of the Customs Code and the administrative practice in this area.

31The only statement in the application which could be construed as an attempt at an argument in that sense is as follows:

‘To apply criminal legislation systematically, by the adoption of penalties for nonpayment of customs duties, to any evasion of value added tax on importation, when failure to pay value added tax on domestic transactions is less severely penalized, is tantamount to attaching particular significance to the crossing of a frontier within the Community, which is incompatible with the common market.’ ²⁸

32That statement by the Commission is however entirely in general terms and does not explain how the French legislation is to be assessed in this respect. This finding is hardly surprising either because, on closer examination, it emerges that the passage quoted above has been taken word for word from the Opinion delivered by Advocate General Darmon in the Drexl case and therefore relates to the Italian provisions at issue there. ²⁹

33In so far as the reply contains an attempt at a comparison of the two systems of penalties, ³⁰ I take this to be only a reaction to the defendant State's arguments in the defence. It should also be noted that, under Article 19 of the Protocol on the Statute of the Court of Justice of the EEC and Article 38(l)(c) of the Rules of Procedure, the Commission must indicate, in any application made under Article 169 of the EEC Treaty, the specific complaints on which the Court is asked to rule and, at the very least in summary form, the legal and factual particulars on which those complaints are based. ³¹ Under Article 42(2) of the Rules of Procedure, a new plea in law may be introduced only on the conditions set out therein, which are not fulfilled here. Finally, the Commission's reply, particulars of which were given above, to the question from the Court indicates that the Commission does not intend to carry out a detailed comparison of the two systems. In these circumstances, consideration of this point would amount to examining the validity of the defence arguments of the defendant State, and not the validity of the Commission's complaint.

34Consequently the Commission's first complaint, to the effect that Article 414 of the Customs Code breaches the principle laid down in the Drexl judgment, must be rejected.

II. Complaint that Article 414 contains no provision which ensures the application of the principles put forward in the Schul judgment for determining the amount of the fine in the case of an offence on importation by a private individual

35I consider this complaint unfounded, if it is admissible at all. ³² The Commission proceeds on the assumption that the amount of the fine laid down by Article 414 of the Customs Code depends on the amount of the VAT not paid on importation. However, that assumption is incorrect, as the defendant State has rightly pointed out. The fine is in fact equal to the value of the goods on which tax was evaded or up to twice that amount, that is, it depends on the value of the imported goods and not on the amount of VAT due.

III. Complaint that in the specific case of Mrs Patron the penalty was disproportionate to the amount of tax due

36This complaint must be rejected as inadmissible as there was no mention of it in either the pre-litigation procedure or in the application and, furthermore, it has no connection with the claim in the application.

37For form's sake I should like to point out that this complaint can in no way be regarded as a mere extension of the first complaint which (like the claim in the Commission's application) is based on a comparison between two cases of taxation and concerns essentially the principle of equal treatment (of which Article 95 is a specific instance). On the other hand, in this complaint the seriousness of a tax offence (expressed in terms of the unpaid tax) is compared with the severity of the penalty, which amounts to examining the matter by reference to the principle of proportionality.

IV. Complaint concerning Mrs Patron's place of residence

38This complaint was first raised in the reply ³³ and must therefore be rejected for the same reasons as the previous complaint.

C — Conclusion

39I therefore propose that the Court should:

dismiss the application;

order the Commission to pay the costs pursuant to Article 69 of the Rules of Procedure.

( *1 ) Original language: German.

¹ Sixth Council Directive of 17 May 1977 on the harmoniza lion of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1).

² Sec Article 2(2) in conjunction with Article 7 of the directive in the original version. Since 1 January 1993 a new system has been in force on the basis of the amending Directive 91/680 of 16 December 1991 (OJ 1991 L 376, p. 1). The new system is no longer based on importation within the Com muntty but on the purchase ot goods within the Community for consideration within the country (Sec Article 28a in the version of the said amending directive).

³ Judgment of 14 January 1986; sec the annex to the rejoinder, the judgment was upheld by the Cour dc Cassation on 15 February 1988.

⁴ See section I(a) of the Report.

⁵ Case 299/86 Drexl [1988] ECR 1213.

⁶ Case 15/81 Gaston Schul, Douane Expediteur BV ν Inspecteur der Invoerrechten en Accijnzen [1982] ECR 1409, last confirmed in the judgments in Cases C-120/88 Commission ν Italy [1991] ECR I-621; C-119/89 Commission ν Spain [1991] ECR I-641; and C-159/89 Commission ν Greece [1991] ECR I-691.

⁷ Council Directive of 28 March 1983 on tax exemptions within the Community for certain means of transport temporarily imported into one Member State from another, OJ 1983 L 105, p. 59.

⁸ Case C-297/89 Rigsadvokaten v Nicolai Christian Ryborg [1991] ECR I-1943.

⁹ Sec section 11(b) of the Report for the I Icaring in this ease.

¹⁰ Case 233/80 Gasati [1981] ECR 2595, paragraph 27; and the Drexl case, cited above, paragraph 17.

¹¹ See paragraphs 23 and 25 of the judgment and paragraph 2 of the operative part.

¹² Sec the quotation in paragraph 5 and paragraph 15 of this Opinion.

¹³ Sec paragraph 23 of the judgment.

¹⁴ The operative part of the judgment does not require the disproportion to be ‘manifest’.

¹⁵ Thus the Court made the following observations in the Drexl case (paragraph 23):

‘Such a disproportion exists where the penalty provided for in the case of importation involves, as a general rule, a term of imprisonment and the confiscation of the goods pursuant to the rules laid down to combat smuggling whereas com parable penalties are not provided for, or are not generally imposed, in the case of offences concerning the payment of value added tax on domestic transactions.’

I lowever, it should be noted that the assumption that offences on importation normally lead to prison sentences under the Italian rules is incorrect: sec Article 292 of Decree No 43 (Report for the Hearing [1988] ECR 1214, at p. 1215) and the judgment of the Italian Corte Suprema di Cassazione of 21 February 1989, Cassazione Penale 1989, No 1345, p. 1547, at p. 1550.

¹⁶ That is well illustrated by the judgment of the Corte Suprema di Cassazione of 21 February 1989 (previous foot note) and the judgment delivered (on 14 December 1988) by the Corte d'Appello, Genoa, as the court of reference in the Drexl case, following the judgment of the Court of Justice: Cassazione Penale 1989, No 1367, p. 1568.

¹⁷ Page 2, first and second paragraphs.

¹⁸ Page 2, first paragraph; p. 3, first paragraph; p. 4, second paragraph.

¹⁹ Page 3, under 1., second paragraph; p. 5, last paragraph.

²⁰ Sec p. 4, penultimate paragraph; p. 7, penultimate para graph; p. 10, first paragraph at end.

²¹ Page 2 of the answer of 9 December 1992, under 1., first paragraph; emphasis added.

²² Sec p. 2 of the reply, last two paragraphs.

²³ Page 3 of the reply, first paragraph; emphasis added.

²⁴ Page 3 of the reply, last paragraph.

²⁵ Paragraph 12 et seq. above.

²⁶ Paragraph 20 et seq. above

²⁷ Or even that the system applying to the importation of goods is severer than the other.

²⁸ Application, p. 8. second paragraph, second sentence.

²⁹ Sec Opinion of Advocate General Darmon [1988] ECR 1222, at p. 1225, paragraph 15.

³⁰ Footnote 20 above.

³¹ Settled case law: sec judgment in Case C-52/90 Commission ν Denmark [1992] ECR I-2187, paragraph 17.

³² The Court has consistently held that the subject-matter of proceedings under Article 169 inter alia is defined by the heads of claim set out in the application (see for example the judgment in Case C-61/90 Commission ν Greece [1992] ECR I-2407, paragraph 9). On this point it should be observed that the wording of the claim in this case covers only the first complaint.

³³ The application states that Mrs Patron imported her car ‘temporarily’ (p. 4, third paragraph). However, the application contains no clear indication that the Commission seeks a declaration from the Court on this point also.