C-371/99 Liberexim

JUDGMENT OF THE COURT (Fifth Chamber)

11 July 2002 *

In Case C-371/99,

REFERENCE to the Court under Article 234 EC by the Hoge Raad der Nederlanden (Netherlands) for a preliminary ruling in the proceedings pending before that court between

Liberexim BV

and

Staatssecretaris van Financiën,

on the interpretation of Article 7(3) of the Sixth Council Directive (77/338/EEC) of 17 May 1977 on the harmonisation 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), as amended by Council Directive 92/111/EEC of 14 December 1992 amending Directive 77/388 and introducing simplification measures with regard to value added tax (OJ 1992 L 384, p. 47),

* Language of the case: Dutch.

THE COURT (Fifth Chamber),

composed of: P. Jann, President of the Chamber, D.A.O. Edward and A. La Pergola (Rapporteur), Judges,

Advocate General: J. Mischo,

Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

— Liberexim BV, by R.G.A. Tusveld and G.J. van Slooten, belastingadviseurs,

— the Netherlands Government, by M.A. Fiersta, acting as Agent,

— the Italian Government, by U. Leanza, acting as Agent, and I.M. Braguglia, avvocato dello Stato,

— the Commission of the European Communities, by J.C. Schieferer, acting as Agent, and J. Stuyck, avocat,

having regard to the Report for the Hearing, after hearing the oral observations of the Netherlands Government, represented by H.G. Sevenster, acting as Agent; of the United Kingdom Government, represented by R. Magrill, acting as Agent, and by M. Hall, barrister; and of the Commission, represented by J.C. Schieferer and J. Stuyck, at the hearing on 13 September 2001,

after hearing the Opinion of the Advocate General at the sitting on 27 November 2001,

gives the following

Judgment

Grounds

1By order of 23 June 1999, received at the Court on 4 October 1999, the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Article 7(3) of the Sixth Council Directive (77/338/EEC) of 17 May 1977 on the harmonisation 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), as amended by Council Directive 92/111/EEC of 14 December 1992 amending Directive 77/388 and introducing simplification measures with regard to value added tax (OJ 1992 L 384, p. 47; 'the Sixth Directive').

2Those questions were raised in proceedings between Liberexim BV ('Liberexim') and the Staatssecretaris van Financiën concerning the obligation on Liberexim to pay value added tax ('VAT') on consignments of milk powder on the ground that they had been imported irregularly into the Netherlands.

Community legislation

Fiscal provisions

3Under Article 2(2) of the Sixth Directive, the importation of goods is subject to VAT.

4Article 7 of the Sixth Directive, headed 'Imports', states:

'1. "Importation of goods" shall mean:

(a) the entry into the Community of goods which do not fulfil the conditions laid down in Articles 9 and 10 of the Treaty establishing the European Economic Community...

2. The place of import of goods shall be the Member State within the territory of which the goods are when they enter the Community.

3. Notwithstanding paragraph 2, where goods referred to in paragraph 1(a) are, on entry into the Community, placed under one of the arrangements referred to in Article 16(1)(B) [(a), (b), (c) and (d)], under arrangements for temporary importation with total exemption from import duty or under external transit arrangements, the place of import of such goods shall be the Member State within the territory of which they cease to be covered by those arrangements'.

5The first and second paragraphs of Article 10(3) of the Sixth Directive provide:

'The chargeable event shall occur and the tax shall become chargeable when the goods are imported. Where goods are placed under one of the arrangements referred to in Article 7(3) on entry into the Community, the chargeable event shall occur and the tax shall become chargeable only when the goods cease to be covered by those arrangements.

However, where imported goods are subject to customs duties, to agricultural levies or to charges having equivalent effect established under a common policy, the chargeable event shall occur and the tax shall become chargeable when the chargeable event for those Community duties occurs and those duties become chargeable.'

Customs provisions

6The Customs Convention on the international transport of goods under cover of TIR carnets, signed in Geneva on 14 November 1975 ('the TIR Convention'), was approved on behalf of the European Economic Community by Council Regulation (EEC) No 2112/78 of 25 July 1978 (OJ 1978 L 252, p. 1). Article 36 of the TIR Convention states:

'Any breach of the provisions of this Convention shall render the offender liable, in the country where the offence was committed, to the penalties prescribed by the law of that country.'

7Article 37 of the TIR Convention provides that '[w]hen it is not possible to establish in which territory an irregularity was committed it shall be deemed to have been committed in the territory of the Contracting Party where it is detected'.

8Article 11(1) of Council Regulation (EEC) No 2726/90 of 17 September 1990 on Community transit (OJ 1990 L 262, p. 1) which comes under Chapter 1, headed 'Procedure', of Title V, headed 'External Community transit', states as follows:

'The principal shall be responsible for:

(a) production of the goods intact and the Tl document at the office of destination by the prescribed time-limit and with due observance of the measures adopted by the competent authorities to ensure identification; (b) observance of the provisions relating to the Community transit procedure;

(c) payment of duties and any other charges due as a result of an offence or irregularity committed in the course of or in connection with a Community transit operation.'

9Article 21(1), (2) and (3) of that regulation provide:

'1. If seals are broken in the course of carriage without the carrier's so intending, the carrier shall, as soon as possible, request that a certified report be drawn up by the competent authorities in the Member State in which the means of transport is located. The authorities concerned shall, if possible, affix new seals.

2. In the event of an accident necessitating transfer to another means of transport, Article 20 shall apply.

3. In the event of imminent danger necessitating immediate unloading of the whole load or of part of the load, the carrier may take action on his own initiative. He shall record such action on the T1 document. Paragraph 1 shall apply in such a case.'

10Article 22 of that regulation provides:

'1. The goods and the T1 document shall be produced at the office of destination.

2....

3. A Community transit operation may be concluded at an office other than that mentioned in the T1 document. That other office shall then become the office of destination.

4. Where the goods are produced at the office of destination after expiry of the time limit prescribed by the office of departure and where this failure to comply with the time limit is due to circumstances which are explained to the satisfaction of the office of destination and are not attributable to the carrier or the principal, the latter shall be deemed to have complied with the time limit prescribed.'

11Article 23 of Regulation No 2726/90 states: '[t]he Community transit operation shall end when the goods and the corresponding T1 document are produced at the office of destination'.

12Article 34(1) of that regulation, which comes under Chapter 4, headed 'Irregularities', of Title V, provides:

'1. When it is found that, in the course of a Community transit operation, an offence or irregularity has been committed in a particular Member State, the recovery of duties or other charges which may be chargeable shall be effected by that Member State in accordance with Community or national provisions, without prejudice to the institution of criminal proceedings.'

13Article 34(2) and (3) of Regulation No 2726/90 sets out the criteria for determining which Member State is competent to effect such a recovery where it is not possible to establish the place where the offence or irregularity has been committed.

14Article 2(1 )(c) and (d) of Council Regulation (EEC) No 2144/87 of 13 July 1987 on customs debt (OJ 1987 L 201, p. 15) which appears in Part A, headed 'Customs debt on importation', of Title I, headed 'Incurrence of customs debt', is worded as follows:

'A customs debt on importation shall be incurred by:

(c) the removal of goods liable to import duties from the customs supervision involved in the temporary storage of the goods or their being placed under a customs procedure which involves customs supervision;

(d) the non-fulfilment of one of the obligations arising, in respect of goods liable to import duties, from their temporary storage or from the use of the customs procedure under which they are placed, or non-compliance with a condition to which the placing of the goods under that procedure is subject, unless it is established that these failures have no significant effect on the correct operation of the temporary storage or customs procedure in question'.

15Article 3(c) and (d) of Regulation No 2144/87 state:

'The moment when a customs debt on importation is incurred shall be deemed to be:

(c) in the cases referred to in Article 2(1 )(c), the moment when the goods are removed from customs supervision;

(d) in the cases referred to in Article 2(1 )(d), either the moment when the obligation, non-fulfilment of which causes the customs debt to be incurred, ceases to be met, or the moment when the goods were placed under the customs procedure concerned where it is established subsequently that a condition governing the placing of the goods under the said procedure was not in fact fulfilled'.

The main proceedings and the questions submitted by the national court

16In October and November 1993 consignments of milk powder originating in Lithuania were shipped to the Netherlands. On two occasions transport from Lithuania was effected under cover of the TIR carnets referred to in Article 3(b) of the TIR Convention ('TIR carnets'), and on seven occasions it was effected from the border of the Community customs area under cover of the T1 documents referred to in Article 15 of Regulation No 2726/90 ('T1 documents').

17Those consignments were loaded in Lithuania into vehicles consisting of a tractor with a semi-trailer, both registered in that country. The consignments transported under cover of TIR carnets entered the Community customs area in Germany in accordance with the prescribed formalities and then continued under cover of those carnets. After being loaded onto the abovementioned vehicles, the other consignments were brought by ferry into the Community customs area for importation into Germany under customs supervision after arrival. A customs agent established in the port of arrival made a declaration of external Community transit in respect of those latter consignments.

18In accordance with the relevant provisions, the registration numbers of the tractor and semi-trailer were entered on the TIR carnets and the T1 documents.

19The TIR carnets and the T1 documents stated that the consignments of milk powder were to be transported to Portugal. However, those goods were taken to a site in Germany, near the Dutch border, where, without the customs authorities being informed, the semi-trailer was detached from the original tractor and attached to a tractor bearing Dutch number plates.

20The goods were then taken to the Netherlands. They were not presented, with the TIR carnets or T1 documents pertaining to them, at the customs offices of destination shown on those carnets and documents, as required by Article 22(1) of Regulation No 2726/90, or at an office of destination in the Netherlands.

21The goods were sold to Liberexim, which resold them to another Dutch company, and were then taken, on behalf of the latter company, to storage facilities in the Netherlands.

22Taking the view that Article 18(1)(c) of the Wet op de omzetbelasting 1968 (1968 Law on Turnover Tax) was applicable, since the consignments of milk powder had ceased to be covered by a customs arrangement in the Netherlands, the Inspecteur Belastingdienst/Douane district Arnhem (tax and customs inspector, Netherlands) required Liberexim, by letter of 26 January 1996, to pay NLG 70 676.10 by way of VAT.

23After the objection lodged with that authority by Liberexim was dismissed, it then brought an action before the Gerechtshof te Arnhem (Regional Court of Appeal, Arnhem).

24By judgment of 18 March 1998, the Gerechtshof dismissed Liberexim's action. It found, first, that under Article 18 of the Wet op de omzetbelasting 1968 the chargeable event for an import of goods occurs, in particular, when the goods cease to be covered by a customs arrangement in the Netherlands and, second, that the goods at issue in the main proceedings had ceased to be covered by the external Community transit arrangements in the Netherlands and not in Germany, as Liberexim had maintained.

25Liberexim appealed in cassation to the Hoge Raad der Nederlanden. It claimed that the VAT had become chargeable in Germany because it had been intended from the outset to transport the goods to a destination other than that shown in the TIR carnets and the T1 documents. Consequently, the conditions set out in the external Community transit arrangements had not been met.

26In those circumstances, the Hoge Raad der Nederlanden decided to stay proceedings and refer the following questions to the Court for a preliminary ruling:

'(1) What is to be understood by the words "cease to be covered" by the external transit arrangements within the meaning of Article 7(3) of the Sixth Directive, if such cessation does not occur in a regular manner — that is to say, otherwise than by the goods being declared for free circulation:

(a) is this the first operation which is carried out in relation to the goods contrary to any provision connected with those arrangements, and is it relevant whether in this operation there is an intention to bring the goods — inter alia through completion of the operation — into circulation within the Community contrary to that provision; or

(b) does such cessation occur (only) once the goods — in the present case following breaking of the seals — have been unloaded from the means of transport without compliance with the obligation to produce the goods with documentation at the office of destination in accordance with Article 22(1) of Regulation [No 2726/90] on Community transit; is it relevant whether in this operation there is an intention to bring the goods — inter alia through completion of the operation — into circulation within the Community contrary to the Community provisions; or

(c) should the words "cease to be covered" be construed as referring to the totality of the operations which result in the goods being brought into circulation within the Community otherwise than in a regular manner?

(2) If the answer to the first question is in accordance with (c) above, where does this cessation occur: at the place where the first irregular operation is carried out, or at the place where a subsequent operation is carried out, in particular the place where the goods — in the present case following breaking of the seals — are unloaded from the means of transport?'

The questions referred by the national court

27By its two questions, which should be considered together, the national court is essentially asking which operation determines the time and the place at which goods transported by road under the external Community transit arrangements cease to be covered by those arrangements within the meaning of Article 7(3) of the Sixth Directive, where those goods are brought onto the Community market after a number of illegal operations have been carried out in various Member States. The national court also asks whether an operation capable of causing goods to cease to be covered by the external transit arrangements must, in order to have such an effect, be performed with the intention to put the goods into circulation in the Community without observing the applicable provisions of Community law.

28As a preliminary point, it is clear from the order for reference that the goods concerned in the main proceedings entered the Community under two different arrangements, namely the external Community transit arrangements and the arrangements under the TIR Convention. However, in its questions, the national court refers only to the external Community transit arrangements.

29As the Advocate General pointed out in that regard in point 92 of his Opinion, the relevant provisions of the TIR Convention are analogous to the corresponding provisions of Regulation No 2726/90. The analysis in this judgment of the provisions of the external Community transit arrangements should therefore be applied to the arrangements under the TIR convention.

The time and place at which goods cease to be covered by the external Community transit arrangements

30The national court mentions, in particular, three ways of determining the point at which goods cease to be covered by the external Community transit arrangements within the meaning of Article 7(3) of the Sixth Directive. First, the cessation may occur in the Member State where the goods are unloaded from the vehicle — after the seals, if any, have been broken — without complying with the obligation to present the goods at the office of destination, in breach of Article 22(1) of Regulation No 2726/90. Second, the cessation may be deemed to have occurred in the Member State where the first operation in relation to those goods is carried out in contravention of any requirement of those arrangements. Finally, cessation may follow from the completion of all such operations but, if that were to be the case, it would be necessary to determine the place where the cessation occurs.

31According to Liberexim, goods cease to be covered by the external Community transit arrangements within the meaning of Article 7(3) of the Sixth Directive upon the performance of the first operation in respect of those goods which contravenes any provision connected with those arrangements. In the case at issue in the main proceedings, the goods ceased to be covered by those arrangements in Germany when the semi-trailer was detached from the tractor.

32The Netherlands and United Kingdom Governments and the Commission submit that in order to determine the place where goods cease to be covered by the external Community transit arrangements and where the import duty on those goods is incurred for the purposes of Article 7(3) of the Sixth Directive it is necessary to determine the place where the customs debt is incurred.

33In that regard, they submit that in order to determine the place where the customs debt is incurred, reference must be made to Regulation No 2144/87 and, in particular, to the situations provided for in Article 2(1)(c) and (d) thereof.

34More specifically, the United Kingdom Government submits that if an operation covered by Article 2(1)(c) or (d) of Regulation No 2144/87 is carried out in respect of the goods, a customs debt is incurred and that fact cannot be affected by any subsequent event. In the case at issue in the main proceedings the customs debt was incurred in Germany and therefore the goods ceased to be covered by the external transit arrangements in Germany, since the change of tractor can be regarded as a removal of the goods from customs supervision just as much as non-compliance with one of the conditions for placing the goods under those arrangements.

35By contrast, the Netherlands Government considers that points (c) and (d) of Article 2(1) of Regulation No 2144/87 are mutually exclusive alternatives. Once it has been found that an operation constituting removal of the goods from customs supervision within the meaning of Article 2(1)(c) has been carried out, it ceases to be of any relevance whether a later operation could in theory give rise to a customs debt under Article 2(1)(d). According to the Netherlands Government, it follows that in the case at issue in the main proceedings, the customs debt was incurred in the Netherlands when the goods were unloaded from the vehicle since that operation constituted a removal of the goods from customs supervision.

36The Italian Government submits that only actions which show an unambiguous intention on the part of the person concerned to dispose of goods subject to particular customs arrangements, without previously carrying out the customs formalities prescribed for that purpose, are such as to cause those goods to cease to be covered by those arrangements. Therefore defects of a purely formal nature, which can be rectified at a later date, cannot give rise to a customs debt or, consequently, to a tax liability. The mere change of tractors cannot, in the absence of unequivocal evidence of an intention to remove the goods from customs supervision and not to present them at the office of destination, be regarded as an operation causing those goods to cease to be covered by the customs arrangements to which they were subject. In the case at issue in the main proceedings, the goods thus ceased to be covered by arrangements under the TIR Convention and the external Community transit arrangements in the Netherlands, where they were unlawfully placed on the market, outside the supervision of the customs authorities.

37The Commission considers that, first, not every failure to comply with the external Community transit arrangements necessarily results in the goods concerned ceasing to be covered by those arrangements. A failure in compliance which has no significant effect on the correct operation of such arrangements does not give rise to any customs debt or, consequently, to any import duty. Second, the first operation which impairs the customs supervision and which is not remedied in accordance with the provisions of Regulation No 2726/90 causes the goods to cease to be covered by the external Community transit arrangements. If the customs supervision is impaired by a series of irregular operations, the decisive operation is the first one which cannot be regarded as a minor violation of those arrangements.

38In order to answer the national court's questions and to determine the place and time at which goods cease to be covered by the external Community transit arrangements within the meaning of Article 7(3) of the Sixth Directive following a number of illegal operations in respect of those goods in various Member States, it is first necessary to determine whether that matter is covered by the customs provisions referred to in that provision and in particular by Regulation No 2726/90.

39The provisions of that regulation, in particular Title V governing the external Community transit procedure, do not specify which irregularities are capable of causing goods to cease to be covered by that customs arrangement.

40Articles 21 and 22 of Regulation No 2726/90 set out a number of circumstances, generally beyond the control of the transporter or principal, in which, although one of the obligations under the external Community transit arrangements has not been fulfilled, those arrangements nevertheless continue to apply, provided that a specific explanation is given or an additional formality is carried out.

41Article 34(1) of that regulation merely provides that when in the course of a Community transit operation, an offence or irregularity has been committed and detected in a particular Member State, 'the recovery of duties or other charges which may be chargeable' is to be effected by the Member State on whose territory the offence or irregularity was committed.

42It follows from that provision that, in principle, where an irregularity falling within the scope of Regulation No 2726/90 is committed on the territory of a Member State and detected by the authorities of that State, those authorities must effect the recovery of duties and other charges.

43However, as the Advocate General pointed out in point 49 of his Opinion, it is not possible to determine from Article 34 the time or the place at which goods cease to be covered by the customs arrangements or, in consequence, which Member State is competent to recover the resultant duties and charges where, as is the case in the main proceedings, a number of irregularities or offences have been committed successively in more than one Member State,

44Second, when Article 7(3) of the Sixth Directive — in so far as it refers to the customs arrangements for the suspension of, or exemption from, import duties in order to determine the point at which the tax liability is incurred — is read in conjunction with Article 11(1)(c) and Article 34(1) of Regulation No 2726/90 — in so far as they refer to the obligation to pay duties and other charges which may become due following an offence or irregularity committed in the course of, or in connection with, a Community transit operation — it becomes apparent that the place where the goods cease to be covered by the customs arrangement envisaged by Article 7(3) of the Sixth Directive is not only the place where the tax liability is incurred pursuant to that directive but also the place where the customs debt is incurred.

45Therefore, in order to answer the national court's questions, reference must be made to Article 2(1) of Regulation No 2144/87, which determines the situations in which a customs debt is incurred, and, in particular, given the circumstances underlying the dispute in the main proceedings, to points (c) and (d) of that provision.

46Article 2(1)(c) of Regulation No 2144/87 provides that the removal of goods from customs supervision gives rise to a customs debt on importation. Under Article 2(1)(d) of that regulation the non-fulfilment of one of the obligations arising, in respect of goods liable to import duties, from the use of the customs procedure or from non-compliance with a condition to which the placing of the goods under that procedure is subject, has the same effect, unless it is established that those failures have no significant effect on the correct operation of the customs procedure in question.

47Article 3 of that regulation determines the time and thus the place at which the customs debt is incurred in the cases referred to in Article 2(1 )(c) and (d) of Regulation No 2144/87.

48It follows from those provisions that where an irregularity occurs and is detected on the territory of a Member State, the competent authorities of that Member State must effect recovery of the duties if that irregularity constitutes a removal of the goods from customs supervision.

49If, on the other hand, the irregularity consists of non-fulfilment of one of the obligations arising under a customs procedure or non-compliance with a condition to which the placing of the goods under that procedure is subject, the competent authorities may examine the transit operation in its entirety in order to determine whether the irregularity has had any significant effect on the correct operation of the customs procedure in question. If there has been no such effect, that irregularity will not necessarily cause the goods to cease to be covered by the transit arrangements.

50However, where a number of irregularities of the kind which fall within the scope of Article 2(1)(c) and (d) of Regulation No 2144/87 have been committed in various Member States, those provisions do not specify which of those irregularities is decisive for determining the time and place where the customs debt is incurred.

si In that respect, it must be observed, first, that the fact that goods have been placed under the external Community transit arrangements implies that those goods must be placed under customs supervision from the start of operations on Community territory until the recovery of import duties which fall due as a result of the goods ceasing to be covered by those arrangements.

52Second, it follows from the provisions of Regulation No 2726/90, in particular Articles 21, 22 and 34, and from Article 2(1)(c) and (d) and Article 3 of Regulation No 2144/87 that the first operation carried out in contravention of the external Community transit arrangements does not necessarily cause the goods to cease to be covered by those arrangements, and that an irregularity which constitutes a removal of the goods from customs supervision always gives rise to a customs debt and, thus, to the goods ceasing to be covered by those arrangements.

53Accordingly, in a situation such as is at issue in the main proceedings, the time and place at which the goods cease to be covered by the external Community transit arrangements is necessarily the time and place at which the first irregularity which can be regarded as a removal of the goods from customs supervision was committed.

54In order to determine whether an operation constitutes a removal of the goods in question from customs supervision, reference must be made to Case C-66/99 D. Wandel [2001] ECR I-873. The new customs provisions interpreted in that judgment, which are laid down in Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1), have not affected the interpretation of the expression 'removal from customs supervision' used in Regulation No 2144/87, which was applicable at the material time in the main proceedings.

55According to paragraph 47 of the judgment in D. Wandel that 'removal' must be understood as encompassing any act or omission the result of which is to prevent, if only for a short time, the competent customs authority from gaining access to goods under customs supervision and from monitoring them as provided for by the Community customs rules.

56In circumstances such as those in the main proceedings, irregularities committed in a Member State in breach of the provisions of Regulation No 2726/90, consisting of breaking the seals, unloading the goods and placing them on the market, constitute a removal of the goods from customs supervision and therefore cause the goods to cease to be covered by the external Community transit arrangements. On the other hand, as the Advocate General pointed out in point 81 of his Opinion, the fact that the original tractor was previously replaced by a new tractor in another Member State, without the seals being broken and without unloading or transhipment of the goods, would not have prevented the competent customs authority from carrying out, where appropriate, its supervisory function.

57In view of the foregoing considerations, the reply to the national court on this point must be that where goods, transported by road under the external Community transit arrangements, are placed on the Community market after a number of irregularities have been committed in respect of those goods in various Member States, the goods cease to be covered by those arrangements, within the meaning of Article 7(3) of the Sixth Directive, on the territory of the Member State where the first operation which can be regarded as a removal of the goods from customs supervision was carried out.

Any act or omission which prevents, if only for a short time, the competent customs authority from gaining access to goods under customs supervision and from monitoring them as provided for by the Community customs rules must be regarded as a removal of the goods from customs supervision.

The relevance of intent

58The national court also asks whether an operation which is capable of causing goods to cease to be covered by the external Community transit arrangements under Article 7(3) of the Sixth Directive must, in order to have that effect, be carried out with the intention of putting the goods into circulation in the Community in contravention of the applicable Community provisions.

59According to Liberexim, intent is a necessary component. By contrast, the Netherlands and the United Kingdom Governments and the Commission submit that it is of no relevance whether an operation was or was not carried out with the intention of removing the goods from customs supervision and unlawfully putting them into circulation in the Community.

60Bearing in mind the observations made in paragraph 54 of this judgment, it need simply be noted that at paragraph 48 of the judgment in D. Wandel the Court held that removal of goods from customs supervision does not require intent, but only that certain objective conditions be met.

61The reply to the national court on this point must therefore be that removal of goods from customs supervision does not require intent, but only that certain objective conditions be met.

Costs

Costs

62The costs incurred by the Netherlands, Italian and United Kingdom Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Hoge Raad der Nederlanden by order of 23 June 1999, hereby rules:

1. Where goods, transported by road under the external Community transit arrangements, are placed on the Community market after a number of irregularities have been committed in respect of those goods in various Member States, the goods cease to be covered by those arrangements within the meaning of Article 7(3) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, as amended by Council Directive 92/111/EEC of 14 December 1992 amending Directive 77/388 and introducing simplification measures with regard to value added tax, on the territory of the Member State where the first operation which can be regarded as a removal of the goods from customs supervision was carried out.

Any act or omission which prevents, if only for a short time, the competent customs authority from gaining access to goods under customs supervision and from monitoring them as provided for by the Community customs provisions must be regarded as a removal of the goods in question from customs supervision.

2. Removal of goods from customs supervision does not require intent, but, instead, only that certain objective conditions be met.

Jann Edward La Pergola

Delivered in open court in Luxembourg on 11 July 2002.

P. Jann R. Grass

President of the Fifth Chamber Registrar

OPINION OF ADVOCATE GENERAL MISCHO delivered on 27 November 2001 1

Introduction

1The Hoge Raad der Nederlanden (Supreme Court of the Netherlands) has asked the Court to interpret Article 7(3) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, 2 as amended by Council Directive 92/111/EEC of 14 December 1992, amending Directive 77/388 and introducing simplification measures with regard to value added tax 3 ('the Sixth Directive').

I — Community law context

Fiscal provisions

2 Under Article 2(2) of the Sixth Directive, the importation of goods is subject to value added tax ('VAT').

3 Under Article 7, entitled 'Imports', of the Sixth Directive:

'1. "Importation of goods" shall mean:

(a) the entry into the Community of goods which do not fulfil the conditions laid down in Articles 9 and 10 of the Treaty establishing the European Economic Community...

2The place of import of goods shall be the Member State within the territory of which the goods are when they enter the Community.

3Notwithstanding paragraph 2, where goods referred to in paragraph 1(a) are, on entry into the Community, placed under one of the arrangements referred to in Article 16(1)(B), points (a), (b), (c) and (d), under arrangements for temporary importation with total exemption from import duty or under external transit arrangements, the place of import of such goods shall be the Member State within the territory of which they cease to be covered by those arrangements.

4Under Article 10(3) of the Sixth Directive:

'The chargeable event shall occur and the tax shall become chargeable when the goods are imported. Where goods are placed under one of the arrangements referred to in Article 7(3) on entry into the Community, the chargeable event shall occur and the tax shall become payable only when the goods cease to be covered by those arrangements.

However, where imported goods are subject to customs duties, to agricultural levies or to charges having equivalent effect established under a common policy, the chargeable event shall occur and the tax shall become payable when the chargeable event for those Community duties occurs and those duties become chargeable.

5Article 21 of the Sixth Directive, entitled 'Persons liable to pay tax to the authorities', provides that, on importation, VAT is payable by the person or persons designated or accepted as being liable by the Member State into which the goods are imported.

Customs provisions

6Article 5(2)(a), forming part of Title II, entitled 'Scope', of Council Directive (EEC) No 2726/90 of 17 September 1990 on Community transit, 4 provides as follows:

'By way of derogation from Articles 1 and 3, the Community transit procedure shall not apply to the carriage of goods under cover of:

(a) TIR carnets (TIR Convention), provided that such carriage:

1. began or is to end outside the Community:

7Articles 20, 21 and 22 of Regulation No 2726/90 read as follows:

'Article 20

1. The goods described on a T1 document may, without the need for a new declaration to be made, be transferred to another means of transport under the supervision of the competent authorities of the Member State in the territory of which the transfer is to be made. In such a case, the competent authorities shall record the transfer on the T1 document.

2. The competent authorities may, subject to such conditions as they shall determine, authorise such transfer without their supervision. In such a case, the carrier shall record the relevant details on the T1 document and shall inform the competent authorities of the Member State of transfer, for the purposes of authentication.

Article 21

1. If seals are broken in the course of carriage without the carrier's so intending, the carrier shall, as soon as possible, request that a certified report be drawn up by the competent authorities of the Member States in which the means of transport is located. The authorities concerned shall, if possible, affix new seals.

2. In the event of an accident necessitating transfer to another means of transport, Article 20 shall apply.

3. In the event of imminent danger necessitating immediate unloading of the whole load or part of the load, the carrier may take action on his own initiative. He shall record such action on the T1 document. Paragraph 1 shall apply in such a case. LIBEREXLM 4. If, as a result of accidents or other incidents arising in the course of carriage, the carrier is not in a position to observe the time limit referred to in Article 13, he shall inform the competent authorities referred to in paragraph 1 as soon as possible. Those authorities shall then record the relevant details on the T1 document.

Article 22

1. The goods and the T1 document shall be produced at the office of destination.

2. The office of destination shall record on the copies of the T1 document the details of controls carried out and shall without delay send a copy to the office of departure and retain the other copy.

3. A Community transit operation may be concluded at an office other than that mentioned in the T1 document. That other office shall then become the office of destination.

4. Where the goods are produced at the office of destination after expiry of the time limit prescribed by the office of departure and where this failure to comply with the time limit is due to circumstances which are explained to the satisfaction of the office of destination and are not attributable to the carrier or the principal, the latter shall be deemed to have complied with the time limit prescribed.'

8Article 34, forming part of Chapter 4, entitled 'Irregularities', of Title V of Regulation No 2726/90, provides as follows:

'1. When it is found that, in the course of a Community transit operation, an offence or irregularity has been committed in a particular Member State, the recovery of duties or other charges which may be chargeable shall be effected by that Member State in accordance with Community or national provisions, without prejudice to the institution of criminal proceedings.

2. When it is found that, in the course of or in connection with a Community transit operation, an offence or irregularity has been committed and the place of the offence or irregularity cannot be determined, it shall be deemed to have been committed in the Member State in which it was detected.

3. When the consignment has not been produced at the office of destination and the place of the offence or irregularity cannot be established, such offence or irregularity shall be deemed to have been committed in the Member State to which:

— the office of departure belongs,

or

— the office of transit at the point of entry into the Community belongs and to which a transit advice note has been given,

unless, within a period to be determined, proof of the regularity of the transit operation or of the place where the offence or irregularity was actually committed is furnished to the satisfaction of the competent authorities.

If, in the absence of such proof, the said offence or irregularity remains deemed to have been committed in the Member State of departure or in the Member State of point of entry as referred to in the first subparagraph, second indent, the duties and other charges relating to the goods concerned shall be levied by that Member State in accordance with Community or national provisions.

If, before expiry of the period of three years from the date of registration of the T1 declaration, the Member State where the said offence or irregularity was actually committed is determined, that Member State shall, in accordance with Community or national provisions, recover the duties and other charges (apart from those levied, pursuant to the second subparagraph, as own resources of the Community) relating to the goods concerned. In this case, once the proof of such recovery is provided, the levies and other charges initially levied (apart from those levied as own resources of the Community) shall be refunded.

9Article 2 of the Customs Convention on the international transport of goods under cover of TIR carnets, concluded in Geneva on 14 November 1975 ('the TIR Convention'), approved on behalf of the European Economic Community by Council Regulation (EEC) No 2112/78 of 25 July 1978, 5 provides as follows:

'This Convention shall apply to the transport of goods without intermediate reload ing, in road vehicles, combinations of vehicles or in containers, across one or more frontiers between a customs office of departure of one Contracting Party and a customs office of destination of another or the same Contracting Party, provided that some portion of the journey between the beginning and the end of the TIR operation is made by road.'

10Under Article 25 of the TIR Convention:

'If the customs seals are broken en route... or if any goods are destroyed or damaged without breaking of such seals, the procedure laid down in Annex 1 to this Convention for the use of the TIR carnet shall, without prejudice to the possible application of the provisions of national law, be followed, and the certified report in the TIR carnet shall be completed.'

11Articles 36 and 37 of the TIR Convention provide that:

'Article 36

Any breach of the provisions of this Convention shall render the offender liable, in the country where the offence was committed, to the penalties prescribed by the law of such country.

Article 37

When it is not possible to establish in which territory an irregularity was committed, it shall be deemed to have been committed in the territory of the Contracting Party where it is detected.'

12Article 2(1)(c) and (d), which appear in Part A, 'Customs debt on importation', of Title I, 'Incurrence of customs debt', of Council Regulation (EEC) No 2144/87 of

13 July 1987 on customs debt, provide as follows:

'A customs debt on importation shall be incurred by:

(c) the removal of goods liable to import duties from the customs supervision involved in the temporary storage of the goods or their being placed under a customs procedure which involves customs supervision;

(d) the non-fulfilment of one of the obligations arising, in respect of goods liable to import duties, from their temporary storage or from the use of the customs procedure under which they are placed, or non-compliance with a condition to which the placing of the goods under that procedure is subject, unless it is established that these failures have no significant effect on the correct operation of the temporary storage or customs procedure in question.'

13Article 3 of the same regulation states that:

'The moment when a customs debt on importation is incurred shall be deemed to be:

(c) in the cases referred to in Article 2(1)(c), the moment when the goods are removed from customs supervision;

(d) in the cases referred to in Article 2(1)(d), either the moment when the obligation, non-fulfilment of which causes the customs debt to be incurred, ceases to be met, or the moment when the goods were placed under the customs procedure concerned where it is established subsequently that a condition governing the placing of the goods under the said procedure was not in fact fulfilled.'

14One of the forms 7 of 'removal from customs supervision' for the purposes of Article 2 of Regulation No 2144/87 is described in Article 1 of Commission Regulation (EEC) No 597/89 of 8 March 1989 laying down provisions for the implementation of Regulation No 2144/87, 8 which is worded as follows:

'The presentation of a customs declaration for the goods in question, or any other act having the same legal effects, and the production for endorsement by the competent authorities of a document, shall be considered as removal of goods from customs supervision within the meaning of Article 2(1)(c) of Regulation (EEC) No 2144/87 to the extent that these acts have the effect of wrongly conferring on them the legal status of Community goods.'

15Regulation (EEC) No 2913/92 9d oes not form part of the legal context of this case because, as we shall see, the main proceedings relate to events which took place before the date on which it took effect.

II — The main proceedings

16During October and November 1993 consignments of milk powder originating in Lithuania were imported into the Netherlands. On two occasions transport from Lithuania was effected under cover of a TIR carnet, and on seven occasions it was effected under cover of a T1 document from the borders of the Community customs area.

17The consignments of milk powder were loaded in Lithuania into means of transport consisting of a truck with a semi-trailer, both registered in that country. The powder transported under cover of TIR carnets entered the Community customs area in Germany in accordance with the formalities prescribed for that purpose and then continued under the cover of the TIR carnets. The other consignments were loaded onto the abovementioned means of transport and brought by ferry into the Community customs area for importation into Germany under customs supervision after arrival. A customs agent established in the port of arrival made a declaration of external Community transit in relation to the latter consignments.

18In accordance with the relevant provisions, the registration numbers of the truck and semi-trailer were entered on the TIR carnets and the T1 documents, which showed that the goods were intended for delivery in Portugal.

19Nevertheless, the goods were taken to the premises of Haukes Transportgesells chaft in Wyler (Germany), near a border crossing to the Netherlands. One Mr Jan Lamme, against whom, as the main suspect, criminal proceedings have been instituted in respect of the imports in question, or a member of the organisation which he had set up, was waiting there with a truck bearing Dutch number plates. The trailer was detached from the original truck and attached to the Dutch truck without the customs authorities being informed.

20The goods were then transported to the Netherlands. They were not presented, accompanied by the TIR carnets or T1 documents, at the customs offices of destination shown on the documents, as required by Article 22(1) of Regulation No 2726/90, or at an office of destination in the Netherlands.

21The goods were sold by Mr Lamme to Liberexim BV ('Liberexim'), which resold them to another Dutch company, and were then delivered in the same year, on behalf of the latter company, to storage facilities of some 12 companies in the Netherlands.

22On 26 January 1996 the Inspecteur der Belastingdienst Arnhem ('the Inspector') wrote to Liberexim demanding the payment of a total of NLG 70 676.10 by way of VAT on the ground that Article 18(1), main clause and (c), of the Wet op de omzetbelasting (Law on Turnover Tax) of 28 June 1968 (Stbl. 329, 'the VAT Law') was applicable because the consignments of milk powder had 'ceased to be covered' by a customs arrangement in the Netherlands.

23When Liberexim's objection was dismissed by the Inspector, it appealed against his decision to the Gerechtshof (Regional Court of Appeal) te Arnhem (Netherlands).

24The Gerechtshof dismissed the appeal by judgment of 18 March 1998 and interpreted Article 18 of the VAT law as meaning that the chargeable event for an 'import of goods' takes place, in particular, where the goods 'cease to be covered' by a customs arrangement in the Netherlands. On the basis of the proven facts and extracts from reports, the Gerechtshof found that the goods in question had 'ceased to be covered' by Community external transit arrangements in the Netherlands and not in Germany, as Liberexim had maintained.

25Liberexim lodged an appeal on a point of law with the Hoge Raad der Nederlanden. It argued that VAT had become chargeable in Germany because it was proposed to transport the goods to a destination other than that shown in the declaration. Consequently, according to Liberexim, the conditions which had to be taken into account when goods were placed under Community external transit arrangements had not been fulfilled.

III — The questions referred

26Under those circumstances, the national court took the view that the outcome of the case depended on the interpretation of Article 7(3) of the Sixth Directive and decided to stay the judgment and refer the following questions to the Court for a preliminary ruling:

'(1) What is to be understood by the words "cease to be covered" by the external transit arrangements within the meaning of Article 7(3) of the Sixth Directive, if such cessation does not occur in a regular manner — that is to say, otherwise than by the goods being declared for free circulation:

(a) is this the first operation which, in (b) does such cessation occur (only) once the goods — in the present case following breaking of the seals — have been unloaded from the means of transport without compliance with the obligation to produce the goods with documentation at the office of destination in accordance with Article 22(1) of Regulation [No 2726/90]; is it relevant whether in this operation there is an intention to bring the goods — inter alia through completion of the operation — into circulation within the Community contrary to the Community provisions; or

(c) should the words "cease to be covered" be construed as referring to the totality of the operations which result in the goods being brought into circulation within the Community otherwise than in a regular manner?

relation to the goods, is carried out (2) If the answer to the first question is in contrary to any provision connected with those arrangements, and is it relevant whether in this operation there is an intention to bring the goods — inter alia through completion of the operation — into circulation within the Community contrary to that provision; or accordance with heading (c), where does this cessation occur; does it occur in the place where the first irregular operation is carried out, or in the place where a subsequent operation is carried out, in particular the place where the goods — in the present case following breaking of the seals — are unloaded from the means of transport?'

IV — The submissions before the Court

27The positions taken by the different interveners with regard to the first question may be summarised as follows.

28According to Liberexim, 'it follows from Article 34 [of Regulation No 2726/90] that a customs debt is incurred where, first, an irregularity and, second, an offence occurs. No conditions are laid down with regard to such irregularities or offences for the purposes of those provisions'. Therefore, according to Liberexim, 'in principle any offence or irregularity means that import duties become payable'.

29Consequently Liberexim proposes that 'the Court should rule that the reply to point (a) of the first question from the Hoge Raad must be in the affirmative since, having regard to the acts described in the Hoge Raad judgment, which were in breach of the provisions of Community law in general and those of Regulation (EEC) No 2855/85 in particular, import duties became payable.'

30The Netherlands Government considers that, 'to determine the place where value added tax becomes payable on importation in the case of goods which are covered by the external transit arrangements referred to by Article 7(3) of the Sixth Directive and then cease to be covered by those arrangements, it is necessary to determine the place where the customs debt is incurred'.

31According to the Netherlands Government, the customs debt was incurred when the goods were unloaded from the means of transport — in the present case, after the seals were broken — without presentation of the goods and documents at a customs office of destination, because that act constituted removal of the goods from customs supervision pursuant to Article 2(1)(c) of Regulation No 2144/87.

32The Netherlands Government adds that the question whether the change of truck, referred to in question 1(a) from the national court, gives rise to a customs debt for the purpose of Article 2(1)(d) of Regulation No 2144/87 is irrelevant because an act which incurred a customs debt within the meaning of Article 2(1)(c) of that Regulation was detected. According to the Netherlands Government, the general scheme of those provisions has the consequence that the criterion of non-fulfil ment of one of the obligations or non compliance with one of the conditions of Article 2(1)(d) of Regulation No 2144/87 can no longer apply.

33Therefore the Netherlands Government proposes that the Court's reply should be that 'goods "cease to be covered" by the external transit arrangements for the purpose of Article 7(3) of the Sixth Directive — if such cessation is irregular, that is to say, otherwise than by means of a declaration that the goods are in free circulation — only where the goods — after the seals are broken, as the case may be — are unloaded from the means of transport without the obligation to present the goods and the document at the office of destination being fulfilled.'

34The Italian Government submits that only acts which indicate an unambiguous intention on the part of the operator concerned to obtain power to dispose of goods subject to particular customs arrangements, without previously carrying out the customs formalities prescribed for that purpose, are such as undoubtedly to cause in an irregular manner the goods in question to 'cease to be covered' by such arrangements. Therefore defects of a purely formal nature, which by law can be rectified at a later date, cannot constitute conditions for a customs debt and, consequently, a tax liability, to arise.

35Therefore, according to the Italian Government, the mere change of trucks cannot, in the absence of unequivocal evidence of an intention to remove the goods from customs supervision and not to present them at the office of destination, be regarded as an act irregularly causing the goods to 'cease to be covered' by the customs arrangements to which they were subject. Consequently, in the main proceedings, the goods could not be deemed to have 'ceased to be covered' by the TIR customs arrangements and the external transit arrangements in Germany. Indeed, according to the Italian Government, this took place in the Netherlands, where the goods in question were illegally put into circulation, without supervision by the customs authorities.

36According to the United Kingdom Government, when goods 'cease to be covered' by the transit arrangements, this coincides with the incurrence of the customs debt. The basic purpose of the external transit arrangements is to suspend customs duties. Once the customs debt is incurred, the goods must be considered as having ceased to be covered by the external transit arrangements.

37The United Kingdom Government considers that the customs debt is incurred at the time of the first act which must be treated as removal of the goods from customs supervision within the meaning of Article 2(1)(c) of Regulation No 2144/87, whether as the non-fulfilment of an obligation or non-compliance with a condition within the meaning of Article 2(1)(d) of the same regulation. If an act is treated in this way, a customs debt is incurred as a result and no subsequent event can affect that. The United Kingdom Government adds that the intentional element is irrelevant in making the necessary assessment. Only objective criteria should be taken into account.

38Specifically, the United Kingdom Government considers that the customs debt was incurred in Germany and therefore the goods 'ceased to be covered' by the external transit arrangements also in Germany because the change of truck had to be treated as removal from customs supervision and also as non-compliance with one of the conditions for placing the goods under the transit arrangements.

39Finally, the Commission's examination of the question from the national court leads it to propose that the Court reply as follows:

'1. Where goods cease to be covered by external transit arrangements within the meaning of Article 7(3) of the Sixth Directive, such cessation is irregular if:

—· either the goods placed under those arrangements are removed from customs supervision;

— or one of the obligations arising from the fact that the goods have been placed under external transit arrangements is not fulfilled, unless it is established that that type of failure had no effect on the correct operation of the arrangements, within the meaning of Article 3 of Council Regulation No 2144/87 of 13 July 1987.

2. The first operation which is carried out contrary to the external transit arrangements does not necessarily mean that the goods cease to be covered by those arrangements. The first operation which compromises customs supervision, where that irregularity is not rectified in accordance with the provisions of Council Regulation No 2726/90, does mean that the goods cease to be so covered.

3. Where customs supervision is compromised by a series of irregularities, the first irregularity which cannot be regarded as of minor importance is the one which will be taken into account to establish the place where the goods ceased to be covered by the external transit arrangements.

4. An irregularity can never be regarded as of minor importance where it has the object of compromising customs supervision.'

40To sum up, it follows from the foregoing observations that Liberexim and the United Kingdom Government submit that, in substance, the goods 'ceased to be covered' by the external transit arrangements in Germany, while the Netherlands and the Italian Governments consider that this took place in the Netherlands. The Commission, for its part, makes no comment on the circumstances of the main proceedings but, in my opinion, it finds that the gravity of the two successive offences must be compared.

V — Assessment

41In essence, the Hoge Raad wishes to know whether goods can be deemed to have 'ceased to be covered' by the external transit arrangements as soon as they have been unloaded — after breaking of the seals, if any — and put into circulation without compliance with the obligation to produce the goods and the T1 document at the office of destination or whether, even in that case, it is conceivable that they may have 'ceased to be covered' earlier as a result of the disregard of any provision connected with those arrangements.

42To enable the Hoge Raad to determine this question, it has asked the Court to interpret the phrase 'cease to be covered' in Article 7(3) of the Sixth Directive, which reads as follows: 'Notwithstanding paragraph 2, where goods referred to in paragraph 1(a) are, on entry into the Community, placed under one of the arrangements referred to in Article 16(1)(B), points (a), (b), (c) and (d), under arrangements for temporary importation with total exemption from import duty or under external transit arrangements, the place of import of such goods shall be the Member State within the territory of which they cease to be covered by those arrangements. '

43As this provision refers to different 'arrangements' and as it is clear from the order for reference that the goods which are the subject of the main proceedings entered the Community under two different arrangements, namely the external transit arrangements and the TIR arrangements, I think the phrase 'cease to be covered' must be considered in the context of each of them for the sake of completeness, even though the actual questions from the national court refer only to the external transit arrangements.

44Consequently the first point I wish to consider is the time at which the goods may be deemed to have 'ceased to be covered' by external transit arrangements.

45The relevant Regulation No 2726/90 gives an explicit reply to this question only in relation to an operation which has been correctly carried out. Under Article 23 of the Regulation, 'the Community transit operation shall end when the goods and the corresponding T1 document are produced at the office of destination'.

46Where an operation is carried out incorrectly, Article 34(1) of the same regulation provides that 'when it is found that, in the course of a Community transit operation, an offence or irregularity has been committed in a particular Member State, the recovery of duties or other charges which may be chargeable shall be effected by that Member State in accordance with Community or national provisions, without prejudice to the institution of criminal proceedings.'

47It follows that an offence must be prosecuted in the Member State where it was committed, if it is possible to determine that State. If the offence is such that it must give rise to the recovery of duties or other charges, they must be recovered in that Member State.

48It is clear that, in a case such as that to which the main proceedings relate, all the requirements of Article 34 of Regulation No 2726/90 are satisfied:

— the offence consisting in the breaking of the seals and unloading of the goods was detected in the Netherlands, because otherwise the case would not have been brought before the Netherlands courts;

— the offence was also committed in that Member State;

— it unquestionably put an end to the transit operation and caused the goods to 'cease to be covered' by the transit arrangements;

— therefore the duties and other charges must be recovered in the Netherlands.

49However, the defendant contends that another offence was previously committed in another Member State. Could this fact be such as to remove the matter from the jurisdiction of the Netherlands authorities and courts? Is it conceivable that the goods may, in spite of everything, have 'ceased to be covered' (which can obviously take place only once) on the occasion of a previous offence? Article 34 of Regulation No 2726/90 does not enable this question to be answered because that article does not take into account situations where irregularities or offences are committed successively in more than one Member State, just as it does not specify the situations where duties and charges must be recovered. It is therefore necessary to ascertain whether the rule to be followed in such a case is supplied by any other provision.

50The United Kingdom and Netherlands Governments, like the Commission, consider that the solution to the problem may be found in Regulation No 2144/87.

51At first sight this is not an obvious approach if reference is made to Article 10(3) of the Sixth Directive which, after stating that, for goods placed under one of the arrangements referred to in Article 7(3), the chargeable event occurs and the tax becomes chargeable only when the goods cease to be covered by those arrangements, continues by providing that '[hjowever, 2... the chargeable event shall occur and the tax shall become payable when the chargeable event [for customs duties and levies to which imported products are subject] occurs and those duties become chargeable.'

52The word 'however' at the beginning of that paragraph gives the impression that there may be ways in which goods 'cease to be covered' which do not coincide with incurrence of the customs debt.

53On the other hand, the argument that the goods must 'cease to be covered' by the external transit arrangements at the time when the customs debt is incurred seems to me undeniably logical.

54As the Italian Government points out, customs duty is suspended in the situation where goods are covered by external transit arrangements. This suspension of the customs debt is not a peripheral effect of those arrangements but, as the United Kingdom Government also observes, a fundamental characteristic, or even the reason for their existence. It is difficult to see what purpose the external transit arrangements could have other than the suspension of customs duties as far as the place of destination.

55It is clear that, although the legislation, in particular Regulation No 2144/87, provides that in certain, specific, irregular situations, a customs debt is incurred for goods subject to the external transit arrangements, it must be concluded, at least in principle, that, on the same occasion, the goods 'cease to be covered' by those arrangements because, from that time onwards, the goods no longer have the benefit of the essential characteristic of those arrangements.

56Therefore I consider that, notwithstanding Article 10(3) of the Sixth Directive, the problem must be examined from the viewpoint of Regulation No 2144/87.

57Let us see the cases where it provides for a customs debt to be incurred.

58Under Article 2 of that regulation, the situations in question are as follows:

'1. A customs debt on importation shall be incurred by:

(a) the placing of goods... in free circulation;

(b) the unlawful introduction into the customs territory of the Community of goods...;

(c) the removal of goods liable to import duties from the customs supervision involved in... their being placed under a customs procedure which involves customs supervision;

(d) the non-fulfilment of one of the obligations arising, in respect of goods liable to import duties,... from the use of the customs procedure under which they are placed, or non-compliance with a condition to which the placing of the goods under that procedure is subject, unless it is established that these failures have no significant effect on the correct operation of the... customs procedure in question;

59It is immediately apparent that the situations which give rise to a customs debt and which are relevant in the present case are those described in (c) and (d).

60In this particular case it cannot be denied that the acts which the national court has to consider took place in the Netherlands and that they must be treated as constituting a removal from customs supervision, that is to say, the unloading of goods after breaking of the seals and their being put into circulation without fulfilment of the obligation to present the goods and the T1 document at the office of destination.

61Nevertheless, should the goods be deemed to have 'ceased to be covered' at an earlier moment in time on the ground that an act had previously taken place in another Member State, namely a change of truck, which, although it may fall within the types of situation referred to in (c) and (d), appears less serious than the acts which took place in the Netherlands?

62According to one argument, supported by the United Kingdom Government and, as to its conclusion, also by Liberexim, the goods 'cease to be covered' by the external transit arrangements at the time of the first act which constitutes either removal from customs supervision or non-fulfilment of one of the obligations arising from the use of the external transit arrangements or non-compliance with a condition to which the placing of the goods under those arrangements is subject.

63In support of this argument, it may be asserted that the external transit arrangements are an exception to the general rule that goods imported into the Community are taxed at the time when they cross the customs border.

64As those arrangements are exceptional, it follows that the goods can only benefit from the legal fiction of extraterritoriality as long as all the obligations imposed by the rules for external transit arrangements are strictly fulfilled. This conclusion is particularly compelling in so far as the goods circulate on Community territory without being subject to constant supervision by the customs authorities. Therefore operators enjoy a kind of 'trust relationship' in return for complying with the conditions entailed by the arrangements.

65Consequently goods necessarily 'cease to be covered' by the external transit arrangements if one of the obligations entailed is no longer fulfilled, that is to say, simultaneously with an act which must be treated either as removal from customs supervision or as non-fulfilment of one of the obligations arising, in respect of goods liable to import duties, from the use of the customs procedure in question, or as non compliance with a condition to which the placing of the goods under that procedure is subject, unless it is established that the latter types of failure have no significant effect on the correct operation of the customs procedure in question.

66In concrete terms, if criminal proceedings are commenced in the Member State where the goods were placed under external transit arrangements, it is for the competent court of that Member State to ascertain whether an offence has actually been committed under those arrangements in the territory of that State.

67If the offence can be treated as removal of the goods from customs supervision, the court must uphold the decision to recover duties.

68If, on the other hand, the offence consists in non-fulfilment of an obligation or non-compliance with a condition to which the placing of the goods under the procedure in question is subject, the court will consider whether it can be shown that the offence did not prevent the operation from being completed correctly. For this purpose, the operator in question must prove that the goods were actually presented, still sealed and with the T1 document intact, at the office of destination. Accordingly the court of the country of departure may take account of the subsequent stages of the transit operation in the territory of other Member States.

69By contrast, if no objective offence was committed in the Member State of the court before which the case is brought, that court must decline jurisdiction.

70What, then, is the situation where, as in the present case, an offence was detected and proceedings were instituted in a Member State where the transit operation was continued or completed? In that case the court will, of course, examine the nature of the offence committed in its country. If it is informed that there was a previous offence in another Member State, it will have to decide which of the two offences caused the goods to 'cease to be covered' by the external transit arrangements.

71It seems to me obvious that, where goods are placed under arrangements entailing customs supervision from the beginning to the end of the operation, the removal of the goods from supervision is the most serious offence possible. It is that which necessarily causes the goods to 'cease to be covered' by the arrangements in question.

72In support of this view, I may also mention the fact that, under Article 2(1)(d) of Regulation No 2144/87, 'non-fulfilment of one of the obligations' or 'non-com pliance with a condition' does not give rise to a customs debt where it is established that such failures have no significant effect on the correct operation of the customs procedure in question. Under those circumstances it is permissible to discuss the actual gravity of the offence.

73This alone shows — and here I refer to point (a) of the first question from the national court — that any kind of 'first operation which, in relation to the goods, is carried out contrary to any provision' connected with the external transit arrangements does not necessarily automatically cause the goods to 'cease to be covered' by those arrangements.

74On the other hand, no proviso of that kind is laid down in relation to the 'removal of goods from customs supervision'. As soon as removal is established, the debt is automatically incurred.

75A court faced with a situation such as that in the main proceedings must therefore determine whether one of the two offences may be regarded as a removal of goods from the supervision of the customs authorities.

76But what happens where two successive offences appear, at first sight, to be capable of being treated as 'removal'?

77In that case, it seems to me that the national court is right to decide which of the two offences has the clearest characteristics of a removal.

78In the present case, the first offence is described as follows by the Hoge Raad: because of the replacement of the original truck (of which the customs authorities were not informed as required by Article 20 of Regulation No 2726/90), 'the transport ceased to correspond to the declaration of external transit, on which the registration numbers of both the truck and trailer were shown for purposes of identification and the maintenance of customs control'. These particulars are required by two regulations cited by the Hoge Raad.

79The United Kingdom Government considers that changing the trucks in that way is a case of removal of the goods from customs supervision.

80However, I consider that acts such as those found in the Netherlands, far more than the change of trucks, conform to the definition of removal which the Court gave in the D. Wandel judgment (delivered after the decision to refer the present questions), paragraph 47 of which reads as follows:

'removal must be understood as encompassing any act or omission, the result of which is to prevent, if only for a short time, the competent customs authority from gaining access to goods under customs supervision and from monitoring them as provided for in Article 37(1) of the Customs Code'.

81Where goods are still in the part of the vehicle in which they were placed under seals by the customs office of departure, it remains possible for a customs or police patrol intercepting the vehicle to gain access to the goods to check whether the seals are those affixed by the office of departure or whether the goods correspond in nature and quantity to those presented at that office at the beginning of the transit operation.

82Therefore I reach the conclusion that, in circumstances such as those of the main proceedings, it is the breaking of the seals, the unloading of the goods and their being put into circulation which, taken together, cause the goods to 'cease to be covered' by the external transit arrangements.

83In my opinion, this conclusion is supported by two considerations. First, it is necessary to safeguard the effectiveness of the provisions relating to transit arrangements. This would be jeopardised if the act or omission in question could not be prosecuted in the Member State where it was found beyond doubt that the goods had been unloaded and put into circulation there, merely because there was a previous irregularity in another Member State which was not detected and punished. Furthermore, in many cases it may be difficult to establish the exact nature of the irregularity and the person responsible.

84Secondly, where there are two successive irregularities in the course of one and the same transit operation, the first of which was not discovered in time and only the second of which led to the goods actually being put into circulation, it accords more with the spirit of the VAT system if the VAT is recovered by the Member State where they were put into circulation rather than by the Member State through whose territory they merely passed in transit.

LIBEREXLM

85The national court also wishes to know whether any importance should be attached to the fact that the act is connected with an intention to put the goods into circulation in the Community without complying with the rules for the arrangements in question.

86I think the reply to this question must be in the negative.

87In the D. Wandel judgment, cited above, the Court also had occasion to give a ruling on the relevance of the element of intent where goods are removed from customs supervision. It held that 'for the purposes of Article 203(1) of the Customs Code, removal of goods from customs supervision does not require intent: it is sufficient if certain objective conditions are met...'. In my opinion, there is no reason for concluding that the situation would be different in the case of non-fulfilment of an obligation or non-compliance with a condition for the purposes of Article 2(1 )(d) of Regulation No 2144/87 or an irregularity within the meaning of Article 34 of Regulation No 2726/90.

88The fact that it is sufficient if 'certain objective conditions' are met also means that the court cannot conclude that an offence has been committed solely on the basis of the presumed intention of the economic operator concerned.

89On the other hand, the element of intent may be relevant to the question whether Liberexim can be regarded as liable for VAT. In the D. Wandel judgment, cited above, the Court observed that 'intention is relevant only when it comes to ascertaining who is liable for the debt arising as a result of the removal of goods. Although the person who removed the goods from customs supervision is unconditionally liable for the debt, persons who participated in their removal, or who acquired or held the goods in question, are debtors only if they were aware or should reasonably have been aware that the goods were being removed from customs supervision for the purposes of Article 203(1) of the Customs Code'.

90However, the question whether Liberexim is liable for VAT depends on Article 21 of the Sixth Directive, which is not the subject of the present reference for a preliminary ruling. Consequently this point does not call for further consideration.

91The final question, which should be examined for the sake of completeness, is

92On this point, it must be observed that whether the foregoing observations relating the provisions of Articles 36 and 37 of the to external transit arrangements also apply TIR Convention are similar to those into the TIR procedure to which, under Article 34 of Regulation No 2726/90. Article 5(2)(a) of Regulation No 2726/90, Therefore I consider that the same criteria the rules for external transit arrangements should be applied to the TIR procedure as do not apply.

those for the external transit arrangements.

VI — Conclusion

93For all the reasons given above, I propose that the Court reply as follows to the questions from the Hoge Raad der Nederlanden:

(1) As a general rule, where goods 'cease to be covered' in an irregular manner by external transit arrangements within the meaning of Article 7(3) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, as amended by Council Directive 92/111/EEC of 14 December 1992, amending Directive 77/388 and introducing simplification measures with regard to value added tax, such cessation of cover occurs at the time of the first act constituting:

— removal of the goods from customs supervision, within the meaning of Article 2(1)(c) of Council Regulation (EEC) No 2144/87 of 13 July 1987 on customs debt, or

— non-fulfilment of one of the obligations arising, in respect of goods liable to import duties, from the use of the customs procedure under which they are placed, or non-compliance with a condition to which the placing of the goods under that procedure is subject, unless it is established that these failures have no significant effect on the correct operation of the customs procedure in question, within the meaning of Article 2(1)(d) of Regulation No 2144/87.

(2) However, where, in circumstances such as those of the main proceedings, in the course of one and the same external transit operation, an irregularity occurs which is not discovered until the occasion of a subsequent irregularity consisting in the breaking of seals, the unloading of goods and their being put into circulation, without fulfilment of the obligation to present the goods and the document at the office of destination, it is the second irregularity which causes the goods to 'cease to be covered' by the external transit arrangements within the meaning of Article 7(3) of the Sixth Directive 77/388/EEC, as amended by Directive 92/111.

(3) No importance is to be attached to the intention of the person responsible for the irregularity.

Notes

(1) Original language: French.

(2) OJ 1977 L 145, p. 1.

(3) OJ 1992 L 384, p. 47.

(4) OJ 1990 L 262, p. 1.

(5) OJ 1978 L 252, p. 1.

(6) OJ 1987 L 201, p. 15.

(7) See the first recital of this Regulation.

(8) OJ 1987 L 65, p. 11.

(9) Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1, 'the Customs Code'). Under Article 253 of the said Regulation, it applies from 1 January 1994.

(10) Under Article 14(4) of Regulation No 2726/90, the office of departure may. subject to certain conditions, dispense with sealing.

(11) Emphasis added.

(12) Emphasis added.

(13) Case C-66/99 [2001] ECR 1-873, paragraph 47. Although this definition was given on the basis of provisions of the Customs Code, I do not think that the definition of 'removal' could have been different under the regulations preceding the Customs Code.

(14) Emphasis added.

(15) See the D. Wjiulcl judgment, cited above, paragraph 48.