C-455/98 Salumets and Others

JUDGMENT OF THE COURT (First Chamber)

29 June 2000 *

In Case C-455/98,

REFERENCE to the Court under Article 177 of the EC Treaty (now Article 234 EC) by the Tampereen Käräjäoikeus, Finland, for a preliminary ruling in the proceedings pending before that court between

Tullihallitus

and

Kaupo Salumets and Others

on the interpretation 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 (OJ 1977 L 145, p. 1), Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products (OJ 1992 L 76, p. 1), Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures

* Language of the case: Finnish.

of excise duties on alcohol and alcoholic beverages (OJ 1992 L 316, p. 21) and Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1),

THE COURT (First Chamber),

composed of: L. Sevón, President of the Chamber, P. Jann (Rapporteur) and M. Wathelet, Judges,

Advocate General: A. Saggio,

Registrar: H.A. Rühi, Principal Administrator,

after considering the written observations submitted on behalf of:

— Mr Tallbak, by J. Vuorilahti, lawyer practising in Tampere,

— Mr Heikkinen and Mr Koivula, by T. Vähätalo, lawyer practising in Tampere,

— Mr Kortelainen and Mr Lempinen, by J. Ojala, lawyer practising in Helsinki,

— the Finnish Government, by H. Rotkirch and T. Pynnä, Valtionasiamiehet, acting as Agents, — the Greek Government, by K. Georgiadis, Legal Agent in the State Legal Service, and E.-M. Mamouna, of the Special Department for Community Legal Matters of the Ministry of Foreign Affairs, acting as Agents,

— the Italian Government, by Professor U. Leanza, Head of the Legal Department in the Ministry of Foreign Affairs, acting as Agent, assisted by I.M. Braguglia, Avvocato dello Stato,

— the Commission of the European Communities, by R. Tricot and K. Leivo, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Mr Tallbak, represented by J. Vuorilahti, Mr Heikkinen and Mr Koivula, represented by T. Vähätalo, the Finnish Government, represented by T. Pynnä, the Greek Government, represented by V. Kyriazopoulos, Deputy Legal Adviser in the State Legal Service, acting as Agent, and the Commission, represented by R. Tricot and E. Paasivirta, of its Legal Service, acting as Agent, at the hearing on 3 February 2000,

after hearing the Opinion of the Advocate General at the sitting on 23 March 2000, gives the following

Judgment

Legal context and the dispute

1By order of 8 December 1998, received at the Court on 14 December 1998, the Tampereen Käräjäoikeus (Tampere District Court), Finland, referred to the Court for a preliminary ruling under Article 177 of the EC Treaty (now Article 234 EC) a question on the interpretation 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 (OJ 1977 L 145, p. 1, hereinafter 'the Sixth Directive'), Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products (OJ 1992 L 76, p. 1), Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages (OJ 1992 L 316, p. 21) and Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1, hereinafter 'the Customs Code').

2That question was raised in proceedings between the Finnish Tullihallitus (Customs Administration) and Mr Salumets and other persons prosecuted for smuggling into Finland ethyl alcohol from a non-member country.

Community legislation

3Article 202 of the Customs Code provides:

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

(a) the unlawful introduction into the customs territory of the Community of goods liable to import duties,

2. The customs debt shall be incurred at the moment when the goods are unlawfully introduced.

...'

Article 212 of the Customs Code provides:

'The customs debt referred to in Articles 201 to 205 and 209 to 211 shall be incurred even if it relates to goods subject to measures of prohibition or restriction on importation or exportation of any kind whatsoever. However, no customs debt shall be incurred on the unlawful introduction into the customs territory of the Community of counterfeit currency or of narcotic drugs and psychotropic substances which do not enter into the economic circuit strictly supervised by the competent authorities with a view to their use for medical and scientific purposes...'

4Under Article 2 of the Sixth Directive:

'The following shall be subject to value added tax:

2. the importation of goods.'

5Article 1(1) of Directive 92/12 provides:

'This Directive lays down the arrangements for products subject to excise duties and other indirect taxes which are levied directly or indirectly on the consumption of such products, except for value added tax and taxes established by the Community.'

Article 3(1) of that directive provides:

'This Directive shall apply at Community level to the following products as defined in the relevant Directives:

— alcohol and alcoholic beverages,

...'

Under Article 6(1) of that directive:

'Excise duty shall become chargeable at the time of release for consumption or when shortages are recorded which must be subject to with Article 14(3).

Release for consumption of products subject to excise excise duty in accordance

duty shall mean:

(c) any importation of those products, including irregular importation, where those products have not been placed under a suspension arrangement.'

6Article 19(1) of Directive 92/83 provides:

'Member States shall apply an excise duty to ethyl alcohol in accordance with this Directive.'

Article 27(1) of that directive provides:

'Member States shall exempt the products covered by this Directive from the harmonised excise duty under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse:

(a) when distributed in the form of alcohol which has been completely denatured in accordance with the requirements of any Member State, such requirements having been duly notified and accepted in accordance with paragraphs 3 and 4 of this Article. This exemption shall be conditional on the application of the provisions of Directive 92/12/EEC to commercial movements of completely denatured alcohol;

...'

National legislation

7Under the Alkoholilaki (Law on alcohol), No 1143/1994, only traders in possession of an import licence or holders of a licence for personal use are authorised to import ethyl alcohol into Finnish territory.

8Under the Valmisteverotuslaki (Law on excise duty), No 1469/1994, alcohol and alcoholic drinks introduced into Finland from another Member State or imported from a non-member country are subject to excise duty.

9Under the Arvonlisäverolaki (Law on value added tax (VAT)), No 1501/1993, goods imported into Finnish territory from a State which is not a member of the Community are subject to VAT.

The main proceedings and the question referred for a preliminary ruling

10It appears from the documents in the case that the defendants in the main proceedings were convicted by the Käräjäoikeus and sentenced to fines and imprisonment for having smuggled into Finland during 1996 and 1997 about 100 000 litres of ethyl alcohol from Estonia. It is common ground that some of the alcohol thus unlawfully imported was already bottled, while the remainder was bottled in Finland, in a former stable, in unhygienic conditions.

11The Käräjäoikeus separated from the criminal proceedings the application by the Tullihallitus for Mr Salumets and his accomplices to be ordered, pursuant to the Laki alkoholi- ja alkoholijuomaverosta (Law on tax on alcohol and alcoholic drinks), No 1471/1994, to pay customs duty, VAT, excise duty and alcohol duty which should have been paid by the importers when the goods entered Community territory, amounting to approximately FIM 38 000 000.

12The Käräjäoikeus, hearing that application, expressed doubt as to whether the provisions of the Customs Code and the tax directives mentioned in paragraph 1 above apply also to ethyl alcohol imported as contraband.

13In particular, that court is uncertain whether the unlawful importation into Finland of ethyl alcohol, which is not intended as such for human consumption and the market for which is much smaller than for other alcoholic drinks because of the system of authorisation governing such imports in Finland, ought not to be treated in the same way as the unlawful supply of narcotic drugs and the importation of counterfeit currency, which, according to the Court's case-law, are not subject to customs duty or VAT.

14Those were the circumstances in which the Tampereen Käräjäoikeus stayed proceedings and referred the following question to the Court for a preliminary ruling:

'Are the European Community tax directives Council Directive 92/12/EEC of 25 February 1992, Council Directive 92/83/EEC of 19 October 1992 and Council Directive 77/388/EEC of 17 May 1977 and the Customs Code (Council Regulation (EEC) No 2913/92 of 12 October 1992) to be interpreted as meaning that the provisions concerning tax liability and customs debts apply to the smuggling of ethyl alcohol?'

15The defendants in the main proceedings submit that those directives and the Customs Code are not applicable to the importation of contraband ethyl alcohol. Because of its high alcohol concentration, ethyl alcohol may not be regarded as an alcoholic drink intended for consumption. Such an operation must therefore be treated in the same way as the import of narcotic drugs, which cannot be marketed and are therefore not subject to customs duty or VAT. Moreover, the smuggling of alcohol does not constitute an economic activity within the meaning of the EC Treaty and is therefore wholly outside the Community rules.

16The defendants in the main proceedings refer to Case 50/80 Horvath v Hauptzollamt Hamburg-Jonas [1981] ECR 385, Case 221/81 Wolf v Hauptzollamt Düsseldorf [1982] ECR 3681, Case 294/82 Einberger v Hauptzollamt Freiburg [1984] ECR 1177, Case 269/86 Mol v Inspecteur der Invoerrechten en Accijnzen [1988] ECR 3627 and Case 289/86 Happy Family v Inspecteur der Omzetbelasting [1988] ECR 3655, which concern the unlawful importation of narcotic drugs into the Community or their unlawful supply for consideration within a Member State. They submit that in those judgments the Court held that no customs debt or liability to turnover tax respectively arises on the unlawful importation into the Community or the unlawful supply for consideration within a Member State of narcotic drugs, in so far as those products are not within economic channels strictly controlled by the competent authorities for use for medical and scientific purposes. That case-law was extended to the importation of counterfeit currency by Case C-343/89 Witzemann v Hauptzollamt München-Mitte [1990] ECR I-4477, paragraph 20.

17The Finnish, Greek and Italian Governments and the Commission, however, rely on other judgments in which the Court held that VAT is due normally where goods marketed unlawfully compete with products which are the subject of lawful operations. That is the case with counterfeit perfumes (Case C-3/97 Goodwin and Unstead [1998] ECR I-3257), the unlawful operation of games of chance (Case C-283/95 Fischer v Finanzamt Donaueschingen [1998] ECR I-3369) and the export of computer systems in unlawful circumstances (Case C-111/92 Lange v Finanzamt Fürstenfeldbruck [1993] ECR I-4677). It follows in particular from paragraph 16 of Lange that the principle of fiscal neutrality precludes a generalised differentiation between lawful and unlawful transactions, except where, because of the special characteristics of certain products, all competition between a lawful economic sector and an unlawful sector is precluded.

18According to those Governments and the Commission, narcotic drugs and counterfeit currency are products which may not be introduced into economic channels because of their intrinsic character of illegal goods. Ethyl alcohol, however, does not have that character, although its import and sale are subject to authorisation in Finland. It can be sold under unlawful conditions much more cheaply than lawful alcoholic drinks for the same purposes of consumption. In those circumstances, alcohol imported as contraband is fully in competition with alcohol products on lawful sale, and so a customs and tax debt arises. In the cases mentioned in the previous paragraph, the Court adopted a very restrictive interpretation of the exceptions to the principle of fiscal neutrality.

19The Court notes, first, that the Horvath, Wolf, Einberger, Mol, Happy Family and Witzemann judgments, which concerned narcotic drugs and counterfeit currency, refer to goods which by their very nature and because of their special characteristics cannot be lawfully marketed or introduced into economic channels. Moreover, it is settled case-law that the principle of fiscal neutrality prevents any general distinction between lawful and unlawful transactions. Consequently, the mere fact that conduct amounts to an offence does not entail exemption from tax; that exemption applies only in specific circumstances where, owing to the special characteristics of certain goods or services, any competition between a lawful economic sector and an unlawful sector is precluded (see Lange, paragraph 19, Fischer, paragraph 28, Goodwin and Unstead, paragraph 9, and Case C-15 8/9 8 Staatssecretaris van Financiën v Coffeeshop Siberië [1999] ECR I-3971, paragraphs 14 and 21).

20That is not the case with the ethyl alcohol at issue in the main proceedings. As submitted by the Governments which presented written observations and by the Commission, ethyl alcohol is not a product whose marketing is prohibited by its very nature or because of its special characteristics.

21The circumstances in which the goods were imported in the present case cannot alter that assessment. An intrinsically lawful product such as ethyl alcohol may not be equated with a narcotic drug for reasons connected with its origin, quality or purity.

22Also immaterial is the fact that ethyl alcohol in the pure state is subject in the Member State concerned to a special system of authorisation both for its production and marketing and for its import and export (see, to that effect, Lange, paragraph 17).

23Moreover, as the Commission also observed, competition between contraband alcohol and alcohol traded in lawful economic channels cannot be ruled out, in that there is a lawful market in alcohol which is precisely the target of contraband products. Consequently, ethyl alcohol may not be regarded as a product which is outside economic channels. It is therefore subject to the taxes and customs duty normally payable under the Community rules.

24Accordingly, the answer to the national court's question must be that the Sixth Directive, Directives 92/12 and 92/83, and the Customs Code must be interpreted as meaning that their provisions on liability to tax and tax debts apply also to contraband importation into Community customs territory of ethyl alcohol from non-member countries.

Costs

Costs

25The costs incurred by the Finnish, Greek and Italian 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 action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (First Chamber)

in answer to the question referred to it by the Tampereen Käräjäoikeus by order of 8 December 1998, hereby rules:

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, Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages and Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code must be interpreted as meaning that their provisions on liability to tax and tax debts apply also to contraband importation into Community customs territory of ethyl alcohol from non-member countries.

Sevón Jann Wathelet

Delivered in open court in Luxembourg on 29 June 2000.

R. Grass

L. Sevón

Registrar President of the First Chamber

OPINION OF ADVOCATE GENERAL SAGGIO delivered on 23 March 2000 *

Introduction

1By order received at the Court on 14 December 1998, the Tampereen Kärä jäoikeus (Tampere District Court), Finland, referred to the Court — in the context of civil proceedings between the Finnish Tul lihallitus (Customs Administration) and certain persons convicted of criminal proceedings for smuggling ethyl alcohol — for a preliminary ruling on customs and excise duties and value added tax (hereinafter 'VAT') on the contraband importation into Finnish territory (into Community territory, therefore) of batches of ethyl alcohol from non-member countries.

Relevant Community legislation

2I shall first summarise the relevant provisions of Community law applicable to the matters at issue concerning respectively: (a) customs duties; (b) excise duties; (c) VAT.

3As regards customs duties, reference should be made to Council Regulation

* Original language: Italian.

(EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code 1 (hereinafter 'the Code'). Under Articles 202(1)(a) and 212 of the Code, customs debts are incurred through 'the unlawful introduction into the Customs territory of the Community of goods liable to import duties', even though 'no customs debt shall be incurred on the unlawful introduction [...] of counterfeit currency or of narcotic drugs and psychotropic substances which do not enter into the economic circuit strictly supervised by the competent authorities with a view to their use for medical or scientific purposes'. The provisions cited apply to ethyl alcohol which has not been denatured in accordance with the Common Customs Tariff. 2

4As regards excise duties, Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty (hereinafter 'Directive 92/12') which applies to alcohol and alcoholic beverages pursuant to Article 3(1), second indent, provides in Article 6(1 )(c) that '[E]xcise duty shall become chargeable at the time of release for consumption' of the relevant products, and covers by the expression 'release for consumption' also the 'unlawful' importation of the products in question. For its part, Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages (hereinafter 'Directive 92/83') requires Member States, under Article 19, to apply excise duty on ethyl alcohol in accordance with harmonised rates, and, on the basis of Article 27(1)(a) and (b), allows denatured alcohol only to be exempt from the harmonised excise duty.

5Finally, as regards VAT, 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 5 (hereinafter 'the Sixth Directive') provides in Article 2 that 'the importation of goods' of any kind is subject to VAT.

Relevant national legislation

6Under Finnish Law No 1143 of

8 December 1994 concerning alcohol ('Alkoholilaki'), alcohol is defined as "ethyl alcohol or an aqueous solution thereof in which ethyl alcohol is more than 60% by volume and which is not denatured" (Paragraph 3(2.4)), and may be imported by a trader to whom an import licence has been granted, and by a person who has been granted a user licence, for his own use (Paragraph 8(2)).

7Under the Finnish Laws No 1469 of 29 December 1994 on Excise Duties ('Val misteverotuslaki') and No 1471 of 29 December 1994 on Tax on Alcohol and Alcoholic Beverages ('Laki alkoholi ja alkoholi-juomaverosta'), ethyl alcohol and alcoholic beverages produced in Finland, coming from another Member State or imported from non-member countries are subject to excise duty, unless the alcohol is strongly denatured or, if slightly denatured, not intended for human consumption. Additionally, under the Finnish Law No 1501 of 30 December 1995 on VAT ('Arvonlisäverolaki'), goods — including ethyl alcohol — imported from non-mem ber countries are subject to payment of VAT on importation.

Facts in the main proceedings

8Between the summer of 1996 and November 1997 Mr Kaupo Salumets, together with other persons, smuggled around 100 000 litres of ethyl alcohol of Chinese and American origin from Estonia into Finland. Part of the imported alcohol was ready bottled for immediate sale; the rest was brought into Finland in containers and bottled there using makeshift equipment in a former stable in unhygienic conditions.

9After being identified, the persons who took part in the smuggling were convicted on 31 March 1998 by a Finnish criminal court and sentenced to imprisonment and fines. Part of the smuggled ethyl alcohol (around 9 500 litres) was confiscated. The Finnish Customs Board later brought a civil action for damages before the Tampereen Käräjäoikeus against Mr Salumets and the others involved, claiming reimbursement of customs duties, excise duties and VAT not paid on the batches of ethyl imported illegally into Finland, a total sum of about FMK 38 million. The action was based on the relevant national legislation, which reflected the provisions of the Community legislation cited above.

Question referred for preliminary ruling

10In the context of these proceedings, the Tampereen Karäjäoikeus, by order of 8 December 1998, asked the Court to clarify by way of a preliminary ruling whether the Code, Directives 92/12 and 92/83, and the Sixth Directive should be interpreted as meaning that the contraband importation of ethyl alcohol is subject to payment of customs duties, excise duties and VAT.

11The national court stated in that order that its difficulties on this point, which gave rise to the reference for a preliminary ruling, lay in the fact that ethyl alcohol in its pure state ('pirtu'), which is not usually intended for immediate consumption, would not be in direct competition with other alcoholic beverages and would have a considerably restricted market because of the system of authorisation in force in Finland. As a result ethyl alcohol in its pure state has strong similarities to narcotic drugs and psychotropic substances, the sale of which is not subject to customs duties, excise duties and VAT. Furthermore, in this case, the imported alcohol involved health risks to consumers because of its low quality and the impurities in it, so that it would not have been possible to market it even in diluted form in aqueous solutions or as a base for other beverages.

Answer to the question

12I would recall that the ethyl alcohol at issue in the main proceedings was smuggled from a non-member country (Estonia) into Community customs territory (Finland) without having been released into free circulation or made subject to customs procedures in accordance with the Code. Under those circumstances, any other goods would be subject to payment of customs duties, excise duties and VAT, in accordance with the relevant Community legislation and, consequently, the national legislation which transposes it. Why then should smuggled ethyl alcohol not be subject to the same duties?

13The submission made by the defendants in the main proceedings — a submission to which the national court appears not to have been insensitive — is based on the premiss that ethyl alcohol in its pure state should not be considered as a beverage intended for normal consumption, but a kind of narcotic drug used by alcoholics, from which the national court infers that it cannot compete with other alcoholic beverages marketed freely. Furthermore, in this case, the alcohol imported from Estonia was of uncertain origin, of poor quality and questionable purity: all told, a product dangerous to the health of anyone consuming it, unsuitable as a base for the preparation of other beverages of a lower alcoholic content and, therefore, not in any way marketable. Finally, the market for alcohol is highly restricted in Finland because of the system of authorisation applicable there concerning the manufacture, marketing, import or export of that product. Therefore, since, in the case of alcohol in its pure state, there cannot be said to be a free commercial channel, that product, according to the defendants, does not constitute a genuine economic activity for the purposes of the EC Treaty and therefore falls outside the scope of the Community legislation that makes the import of goods from non-member countries liable to customs duties, excise duties and VAT.

14The Finnish, Italian and Greek Governments, as well as the Commission, maintain that ethyl alcohol in its pure state cannot in any way be considered as a narcotic drug. Instead, it constitutes a product, like any others, whose importation into Community territory from non-member countries is subject to the duties placed on products in general. In this respect, the principle of fiscal neutrality and the necessity to harmonise the levying of customs duties, excise duties and VAT preclude any distinction between legally imported goods and goods — such as those in point here — which have been smuggled. Because of their lower selling price, the latter are in competition with products imported in full compliance with the law, which bear the corresponding fiscal charges.

15To equate ethyl alcohol in its pure state with narcotic drugs and other psychotropic substances is unconvincing. Admittedly, ethyl alcohol is not usually consumed in its pure state, and if consumed in excessive quantities may cause damage to health, especially if consumed by persons suffering from chronic alcoholism. However, there can be no denying that ethyl alcohol, unlike narcotic drugs, constitutes a product which is lawfully present on the market, and whose manufacture, marketing, import and export, while regulated or limited by law in some Member States, cannot be considered as prohibited by reason of the intrinsic illicit nature of the product. Ethyl alcohol is therefore not affected by the Single Convention on Narcotic Drugs signed in New York on 30 May 1961 and ratified by all Member States of the Community. It is instead considered in the context of commercial transactions as one product among others and included — as mentioned — in the Common Customs Tariff (Combined Nomenclature). Ethyl alcohol in its pure state presents analogies not so much with narcotic drugs as with tobacco and derived products: a product recognised as dangerous to health, but which (at present) it is not unlawful to market and which (at present) is not treated as a drug.

16The same applies where — as in this case — the imported alcohol is of uncertain origin, of poor quality or of questionable purity. Such factors may contribute to making consumption of such a product even more dangerous, but do not change its nature as an intrinsically lawful product. A lawful product cannot be transformed into a narcotic drug for reasons connected with its origin, quality or purity.

17In my opinion, the derogations laid down for narcotic drugs as regards payment of customs duties, excise duties and VAT, derogations all based on the idea that narcotic drugs are goods which, because of their unlawful nature, it is prohibited to market, are therefore not applicable to the contraband importation of ethyl alcohol. I feel it is appropriate to examine these derogations separately in order to explain, given the specificity of each one, the reasons which lead me to find that they are not applicable in this case.

18As far as customs duties are concerned, since 1981 the Court's case-law has made it clear that they cannot be applied to narcotic drugs because these are 'goods which are of such a kind that they may not be put into circulation in any Member State but must on the contrary be seized and taken out of circulation by the competent authorities as soon as they are discovered', except in the case of 'trade which is strictly controlled and limited to authorised use for pharmaceutical and medical purposes'. Narcotic drugs (and, in general, psychotropic substances) may not — according to the reasoning of the Court — be classified as products 'put on the market and absorbed into commercial circulation', and, for this reason are not subject to customs regulations. This interpretation, confirmed in 1982, 1 was in 1990 extended to the importation of counterfeit currency. I would point out that, on the basis of these interpretations of the customs rules, the Code, adopted in 1992, expressly provides in Article 212 that 'no customs debt shall be incurred on the unlawful introduction [...] of counterfeit currency or of narcotic drugs and psychotropic substances which do not enter into the economic circuit strictly supervised by the competent authorities with a view to their use for medical and scientific purposes'. Ethyl alcohol is, however, without doubt a product which is marketed in the Member States and therefore part of the ordinary economic circuit, for which reason the system under which narcotic drugs and counterfeit currency are exempted from customs duties cannot be applied to this product.

19As regards VAT, Community case-law 13 has since 1984 made it clear that the interpretation employed to remove narcotic drugs from the sphere of customs duties also applied to the levying of VAT: '[T]he two charges display comparable essential features since they arise from the fact of importation of goods into the Community and the subsequent distribution thereof through the economic channels of the Member States, and since each constitutes a component of the sale price calculated by a similar method by successive traders'. This parallelism, confirmed in later developments of the case-law on the subject, is also reflected in the wording of Article 10(3) of the Sixth Directive which authorises Member States to link the chargeable event and the charging of VAT on imports with the similar criteria employed for the levying of customs duties. The reasons set out above regarding customs duties therefore lead me to consider that ethyl alcohol, which cannot be assimilated to a narcotic drug, cannot be made the subject of any exceptional regime as regards its liability to VAT.

20The reasoning set out with regard to customs duties and VAT can also apply to excise duties, under which the tax on manufacture and the tax on alcohol, both in point in this case, fall. In the absence of any specific case-law relating to the applicability of excise duties to narcotic drugs, the orientatations developed in the case-law with regard to customs duties and VAT can also apply to excise duties. It is true that Member States must exempt denatured alcohol from harmonised excise duty under Directive 92/83 as well as alcohol imported for medical purposes or for scientific research. In the present case, however, the ethyl alcohol imported from Estonia was not subjected to a denaturing process to make it unfit for consumption, but simply had blue food-colouring added to it intended to make it look like anti-freeze, and was not intended for use for any medical or scientific purpose.

21In conclusion, I consider that ethyl alcohol imported unlawfully from a nonmember country into Community territory must be subject to payment of customs duties, excise duties and VAT, in accordance with the system in force at the time of the unlawful importation. The principle of fiscal neutrality does not permit any distinction to be made between lawful and unlawful operations, for which reason the obligation to pay customs duties, excise duties and VAT applies even if the goods subject to the fiscal charges in question were introduced unlawfully into the Community customs territory. An interpretation to this effect is also valid where — as in this case — ethyl alcohol in its pure state is subject in one Member State to a special system of authorisation concerning production, marketing, importation and export. The Court's case-law has already made it clear that any prohibition on the export of particular goods 'cannot, therefore, be sufficient to remove those products from the scope of the Sixth Directive' and there is no reason not to extend this reasoning also to the importation, subject to any administrative restrictions, of goods on which not only VAT, but also customs duties and excise duties, are chargeable. Furthermore, subsequent Community case-law has taken this direction with regard to the sale of counterfeit perfumes and the unlawful operation of games of chance. Conclusions

Conclusion

22On the basis of the foregoing considerations, I propose that the Court should answer the question put by the national court as follows:

Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, Council Directive 92/83/ EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages and 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 for assessment, must be interpreted as meaning that the contraband importation into the Community customs territory of ethyl alcohol from non-member countries is subject to customs duties, excise duties and value added tax, in accordance with the provisions in force at the time of the unlawful importation.

Notes

(1) OJ 1992 L 302, p. 1.

(2) Codes CN 2207 and CN 2208.

(3) OJ 1992 L 76, p. 1.

(4) OJ 1992 L 316, p. 21.

(5) OJ 1992 L 145, p. 1.

(6) United Nations Treaty Series, 520, No 7515.

(7) Case 50/80 Horvath v Hauptzollamt Hamburg-Jonas [1981] ECR 385. The narcotic drug in question in this judgment was heroin.

(8) Ibid., paragraph 11.

(9) Ibid., paragraph 10.

(10) Ibid., paragraph 12.

(11) Case 221/81 Wolf v Hauptzollamt Düsseldorf [1982] ECR

(368) 1, and Case 240/81 Einberger v Hauptzollamt Freiburg [1982] ECR 3699. The narcotic drugs under consideration here were cocaine and morphine.

(12) Case C-343/89 Witzemann v Hauptzollamt München-Mitte [1990] ECR I-4477.

(13) Case 294/82 Einberger v Hauptzollamt Freiburg [1984] ECR 1177. The judgment was concerned with the import of a number of batches of morphine into Germany.

(14) Ibid., paragraph 18.

(15) Case 269/86 Mol v Inspecteur der Invoerrechten en Accijnzen [1988] ECR 3627 concerning the distribution of amphetamines and Case 289/86 Happy Family v Inspecteur der Omzetbelasting [1988] which concerns the sale of hashish; Case C-158/98 Staatssecretaris van Financiën v Coffeeshop Siberië [1999] ECR I-3971, concerning the provision of a counter for the sale of soft drugs.

(16) See Mol cited above, paragraph 18.

(17) For customs duties see Article 202(1)(a) of the Code. For excise duties see Article 6(1)(c) of Directive 92/12.

(18) Case C-111/92 Lange [1993] ECR I-4677, paragraph 17, which concerns the export to certain countries of eastern Europe of computer systems considered as sensitive.

(19) Case C-3/97 Goodwin and Unstead (19981 ECR I-3257.

(20) Case C-283/95 Fischer [19981 ECR I-3369.