C-500/10 Belvedere Costruzioni

JUDGMENT OF THE COURT (Fourth Chamber)

29 March 2012 ( *1 )

‛Taxation — VAT — Article 4(3) TEU — Sixth Directive — Articles 2 and 22 — Automatic conclusion of proceedings pending before the tax court of third instance’

In Case C-500/10,

REFERENCE for a preliminary ruling under Article 267 TFEU from the Commissione tributaria centrale, sezione di Bologna (Italy), made by decision of 22 September 2010, received at the Court on 19 October 2010, in the proceedings

Ufficio IVA di Piacenza

v

Belvedere Costruzioni Srl,

THE COURT (Fourth Chamber),

composed of J.-C. Bonichot, President of the Chamber, A. Prechal, L. Bay Larsen, C. Toader and E. Jarašiūnas (Rapporteur), Judges,

Advocate General: E. Sharpston,

Registrar: A. Impellizzeri, Administrator,

having regard to the written procedure and further to the hearing on 22 September 2011,

after considering the observations submitted on behalf of:

the Italian Government, by G. Palmieri, acting as Agent, and P. Gentili, avvocato dello Stato,

the European Commission, by E. Traversa and L. Lozano Palacios, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 17 November 2011,

gives the following

Judgment

Legal context and the dispute

1This reference for a preliminary ruling concerns the interpretation of Article 4(3) TEU and Articles 2 and 22 of 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, ‘the Sixth Directive’).

2The reference has been made in proceedings between the Ufficio IVA di Piacenza (Piacenza VAT Office) and Belvedere Costruzioni Srl (‘Belvedere Costruzioni’) concerning an adjustment of value added tax (VAT) for the year 1982.

Legal context

European Union law

3Under Article 2 of the Sixth Directive, the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such and the importation of goods are to be subject to VAT.

4Article 22 of the Sixth Directive provides:

‘…

4. Every taxable person shall submit a return within an interval to be determined by each Member State. …

…

5. Every taxable person shall pay the net amount of the [VAT] when submitting the return. The Member States may, however, fix a different date for the payment of the amount or may demand an interim payment.

…

8. … Member States may impose other obligations which they deem necessary for the correct levying and collection of the tax and for the prevention of fraud.

…’

National law

5Article 3(2bis) of Decree-Law No 40/2010 (GURI No 71, 26 March 2010), converted, with amendments, into Law No 73/2010 (GURI No 120, 25 May 2010) (‘Decree-Law No 40/2010’), reads as follows:

‘In order to ensure that judicial proceedings in tax matters are kept within a reasonable time, as required by the European Convention for the Protection of Human Rights and Fundamental Freedoms [signed in Rome on 4 November 1950 (“the ECHR”)], ratified by Law No 848 of 4 August 1955, having regard to the failure to comply with the reasonable time requirement laid down in Article 6(1) of that Convention, pending tax disputes arising from actions lodged at first instance more than 10 years before the date of entry into force of the law converting the present decree into law, in which the State Tax Authority has been unsuccessful at first and second instance, shall be concluded in accordance with the following rules:

tax disputes pending before the Commissione tributaria centrale, with the exception of those concerning claims for reimbursement, shall be concluded automatically by order of the president of that court or of another member designated for that purpose …

…’

6Law No 73/2010, which converted Decree-Law No 40/2010 into law, entered into force on 26 May 2010.

7The Commissione tributaria centrale (Central Tax Court), which acted as the court of third instance in tax matters, was abolished by Legislative Decree No 545/1992 (GURI No 9, 13 January 1993) with effect from 1 April 1996. It continues to function, however, until the cases brought before it before that date are dealt with.

The dispute in the main proceedings and the question referred for a preliminary ruling

8In its annual VAT return for 1982 Belvedere Costruzioni deducted a tax credit of ITL 22 264 000 described as a credit from the 1981 return. On 12 August 1985 the Ufficio IVA di Piacenza, taking the view that the VAT return for 1981 had been submitted out of time and it was not therefore possible to deduct that tax credit in connection with the VAT return for 1982, sent the company an adjustment notice.

9Belvedere Costruzioni brought proceedings against that notice before the Commissione tributaria di primo grado di Piacenza (Tax Court of First Instance, Piacenza), submitting that the disputed tax credit did not derive from the difference between the tax shown as ‘debited’ on sales and the tax shown as ‘credited’ on purchases in relation to taxable transactions effected in 1981, but represented part of the tax credit mentioned in its tax return for 1980. It argued that, having regard to the relevant national legislation, its right to deduct that tax credit had not been extinguished, while the Ufficio IVA di Piacenza argued the contrary.

10The Commissione tributaria di primo grado di Piacenza allowed the application by decision of 10 October 1986, confirmed by decision of the Commissione tributaria di secondo grado (Tax Court of Second Instance) of 28 May 1990 following the appeal by the Ufficio IVA. The Ufficio IVA thereupon appealed against that decision to the referring court.

11In the order for reference the Commissione tributaria centrale, sezione di Bologna, states that, since the tax authorities were unsuccessful before the courts of first and second instance, it should apply Article 3(2bis)(a) of Decree-Law No 40/2010, which would have the consequence that the decision of the court of second instance would become final and binding and the debt claimed by the tax authorities at the three levels of jurisdiction would be extinguished.

12It considers, however, that the application of that provision may lead to a breach of Article 4(3) TEU and of Articles 2 and 22 of the Sixth Directive, as interpreted in Case C-132/06 Commission v Italy [2008] ECR I-5457, since it definitively bars recovery of the VAT debt the existence of which the tax authorities are expressly seeking to have declared by the court. That in its opinion constitutes a breach of the Italian State’s obligation to ensure effective collection of the European Union’s own resources.

13In those circumstances, the Commissione tributaria centrale, sezione di Bologna, decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:

‘Do Article 10 [EC], now Article 4 [TEU], and Articles 2 and 22 of [the Sixth Directive] preclude legislation of the Italian State laid down in Article 3(2bis) of Decree-Law [No 40/2010], under which the court with jurisdiction in tax matters may not rule on the existence of an alleged tax debt which the tax authorities have sought, in due time, to recover by appealing against an unfavourable decision and which thus in effect provides for the VAT debt at issue to be wholly waived in cases where the courts have ruled at both first and second instance that such a debt does not exist, without the taxable person in favour of whom the waiver has operated having to pay even a fraction of the debt at issue?’

Consideration of the question referred

14By its question, the referring court asks essentially whether Article 4(3) TEU and Articles 2 and 22 of the Sixth Directive must be interpreted as precluding the application in VAT matters of a provision of national law which provides for the automatic conclusion of proceedings pending before the tax court of third instance where those proceedings originate in an application brought at first instance more than 10 years before the date of the entry into force of that provision and the tax authorities have been unsuccessful at first and second instance, the consequence of that automatic conclusion being that the decision of the court of second instance becomes final and binding and the debt claimed by the authorities is extinguished.

Admissibility

15The Italian Government submits that the question is inadmissible. In its opinion, the referring court has failed to comply with the obligation to provide the Court with all the elements of fact and law to enable the Court to understand why it considers that Article 3(2bis) of Decree-Law No 40/2010 involves a waiver by the tax authorities of their power of verification of taxable transactions. In the absence of an analysis of that article in the order for reference, the question is manifestly abstract and hypothetical.

16It must be recalled that a reference for a preliminary ruling made by a national court may be declared inadmissible only where it is quite obvious that the interpretation of European Union law that is sought is unrelated to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, inter alia, Case C-415/93 Bosman [1995] ECR I-4921, paragraph 61, and Case C-450/09 Schröder [2011] ECR I-2497, paragraph 17).

17With regard more specifically to the information that must be provided to the Court in a reference for a preliminary ruling, that information not only serves to enable the Court to provide answers which will be of use to the referring court, it must also enable the Governments of the Member States and other interested parties to submit observations in accordance with Article 23 of the Statute of the Court of Justice of the European Union. It is settled case-law that, for those purposes, it is necessary, first, that the national court should define the factual and legislative context of the questions which it is asking or, at the very least, explain the factual circumstances on which those questions are based. Secondly, the order for reference must set out the precise reasons why the national court is unsure as to the interpretation of European Union law and considers it necessary to refer questions to the Court for a preliminary ruling (Case C-42/07 Liga Portuguesa de Futebol Profissional and Bwin International [2009] ECR I-7633, paragraph 40 and the case-law cited).

18In the present case, the order for reference contains an account of the facts behind the main proceedings and the relevant national law, namely Article 3(2bis) of Decree-Law No 40/2010. It also indicates the reasons why the referring court is unsure as to the compatibility of that article with European Union law and considered it necessary to refer a question to the Court for a preliminary ruling. Far from being abstract and hypothetical, that question appears to be decisive for the outcome of the main proceedings, since, according to the referring court’s analysis of that provision, it will have to conclude the proceedings without ruling on whether the decision challenged before it should stand.

19The question referred for a preliminary ruling must therefore be considered admissible.

Substance

20As the Court observed in Commission v Italy, paragraph 37, it follows from Articles 2 and 22 of the Sixth Directive and Article 4(3) TEU that every Member State is under an obligation to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory. In that regard, Member States are required to check taxable persons’ returns, accounts and other relevant documents, and to calculate and collect the tax due.

21Under the common system of VAT, the Member States are required to ensure compliance with the obligations to which taxable persons are subject, and they enjoy in that respect a certain measure of latitude, inter alia, as to how they use the means at their disposal (Commission v Italy, paragraph 38).

22That latitude is nevertheless limited by the obligation to ensure effective collection of the European Union’s own resources and not to create significant differences in the manner in which taxable persons are treated, either within a Member State or throughout the Member States. The Sixth Directive must be interpreted in accordance with the principle of fiscal neutrality inherent in the common system of VAT, according to which economic operators carrying out the same transactions must not be treated differently in relation to the levying of VAT. Any action by the Member States concerning the collection of VAT must comply with that principle (Commission v Italy, paragraph 39).

23However, in the first place, the obligation to ensure effective collection of European Union resources cannot run counter to compliance with the principle that judgment should be given within a reasonable time, which, under the second paragraph of Article 47 of the Charter of Fundamental Rights of the European Union, must be observed by the Member States when they implement European Union law, and must also be observed under Article 6(1) of the ECHR.

24In the present case, it must be emphasised that Article 3(2bis) of Decree-Law No 40/2010 prescribes the conclusion solely of tax proceedings which, at the date of the entry into force of that provision, have lasted for more than 10 years since the application at first instance was made, and that it pursues the objective, as is apparent from its very wording, of remedying the breach of the reasonable time requirement in Article 6(1) of the ECHR. Moreover, according to the observations submitted to the Court, Article 3(2bis) of Decree-Law No 40/2010 entered into force more than 14 years after the last date on which appeals could be brought before the Commissione tributaria centrale, so that all the proceedings still pending before that court have in fact lasted for over 14 years.

25The facts of the dispute in the main proceedings, which go back about 30 years, show that some of those proceedings have lasted for a much greater number of years. Such a length of proceedings is a priori capable in itself of infringing the reasonable time principle and, moreover, the obligation to ensure the effective collection of the European Union’s own resources.

26In the second place, it is apparent that such a measure is not comparable with those at issue in Commission v Italy. As the Advocate General observes in points 36 and 37 of her Opinion, the measures concerned in that case had been introduced very shortly after the expiry of the deadlines for payment of the VAT normally payable and thus enabled the taxable persons concerned to escape all checks by the tax authorities. The Court held that they constituted a general and indiscriminate waiver of verification of the taxable transactions effected during a serious of tax periods. However, it follows from what has been stated in paragraphs 24 and 25 above that the measure in Article 3(2bis) of Decree-Law No 40/2010 constitutes not a general waiver of the collection of VAT for a certain period but an exceptional provision intended to ensure observance of the reasonable time principle by concluding the oldest proceedings pending before the tax court of third instance, with the consequence that the decision of the court of second instance becomes final and binding.

27Moreover, because of its specific and limited character as a result of its conditions of application, such a measure does not create significant differences in the way in which taxable persons are treated as a whole, and does not therefore infringe the principle of fiscal neutrality.

28Consequently, the answer to the question is that Article 4(3) TEU and Articles 2 and 22 of the Sixth Directive must be interpreted as not precluding the application in VAT matters of an exceptional provision of national law, such as that at issue in the main proceedings, which provides for the automatic conclusion of proceedings pending before the tax court of third instance where those proceedings originate in an application brought at first instance more than 10 years, and in practice more than 14 years, before the date of the entry into force of that provision and the tax authorities have been unsuccessful at first and second instance, the consequence of that automatic conclusion being that the decision of the court of second instance becomes final and binding and the debt claimed by the tax authorities is extinguished.

Costs

29Since 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. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Fourth Chamber) hereby rules:

Article 4(3) TEU and Articles 2 and 22 of 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 must be interpreted as not precluding the application in value added tax matters of an exceptional provision of national law, such as that at issue in the main proceedings, which provides for the automatic conclusion of proceedings pending before the tax court of third instance where those proceedings originate in an application brought at first instance more than 10 years, and in practice more than 14 years, before the date of the entry into force of that provision and the tax authorities have been unsuccessful at first and second instance, the consequence of that automatic conclusion being that the decision of the court of second instance becomes final and binding and the debt claimed by the tax authorities is extinguished.

Signatures

[Signatures]

( *1 ) Language of the case: Italian.

OPINION OF ADVOCATE GENERAL

SHARPSTON

delivered on 17 November 2011 ¹

‛Obligation of Member States to ensure effective collection of VAT — Articles 2 and 22 of the Sixth Directive — Conclusion of judicial proceedings without a decision at third instance’

Introduction

1With a view to reducing a considerable backlog of work in tax courts, the Italian Republic has enacted legislation under which, where the tax authority has been unsuccessful both at first instance and on a first appeal, and where the dispute has been pending for more than 10 years overall, final-instance appeal proceedings brought by the tax authority are to be concluded without a decision on the substance.

2The Commissione Tributaria Centrale, Sezione di Bologna (Central Tax Court, Bologna Section), before which such proceedings are pending, wishes to know whether, where the dispute involves value added tax (‘VAT’), such a provision is compatible with the Member State’s obligation to ensure that the tax is effectively collected.

EU law

3Under Article 4(3) TEU (previously Article 10 EC) Member States must ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union, facilitate the achievement of the Union’s tasks and refrain from any measure which could jeopardise the attainment of the Union’s objectives. There are further specific obligations under VAT legislation.

4Since 1 January 2007, the main VAT provisions have been in Directive 2006/112. ² At the material time in the main proceedings, they were in the Sixth Directive. ³ The national court refers specifically to Articles 2 and 22 of the latter.

5Article 2 stated:

‘The following shall be subject to value added tax:

1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;

2. the importation of goods.’ ⁴

6Article 22 of the Sixth Directive was entitled ‘Obligations under the internal system’. The national court quotes from three paragraphs:

‘4. Every taxable person shall submit a return within an interval to be determined by each Member State. …

5. Every taxable person shall pay the net amount of the value added tax when submitting the return. …

…

8. … Member States may impose other obligations which they deem necessary for the correct levying and collection of the tax and for the prevention of fraud.’ ⁵

7The national court also quotes from paragraphs 37 to 39 of the Court’s judgment in Case C-132/06 Commission v Italy: ⁶

It follows from Articles 2 and 22 of the Sixth Directive, and from Article 10 EC, that every Member State is under an obligation to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory. In that regard, Member States are required to check taxable persons’ returns, accounts and other relevant documents, and to calculate and collect the tax due.

38Under the common system of VAT, Member States are required to ensure compliance with the obligations to which taxable persons are subject and they enjoy in that respect a certain measure of latitude, inter alia, as to how they use the means at their disposal.

39That latitude is nevertheless limited by the obligation to ensure effective collection of the Community’s own resources and not to create significant differences in the manner in which taxable persons are treated, either within a Member State or throughout the Member States. The Court has held that the Sixth Directive must be interpreted in accordance with the principle of fiscal neutrality inherent in the common system of VAT, according to which economic operators carrying out the same transactions must not be treated differently in relation to the levying of VAT (Case C-382/02 Cimber Air [2004] ECR I-8379, paragraph 24). Any action by Member States concerning VAT collection must comply with that principle.’

8In that judgment, the Court concluded that an Italian tax amnesty (Articles 8 and 9 of Law No 289/2002) which replaced, shortly after the expiry of the deadlines fixed for the payment of the VAT amounts normally payable, the obligations under Articles 2 and 22 of the Sixth Directive with other obligations which did not require the payment of those amounts, rendered those articles meaningless. The effect of the law was tantamount to a tax exemption, seriously disrupting the proper functioning of the common system of VAT, distorting the principle of fiscal neutrality by introducing significant variations in the treatment of taxable persons in Italy and infringing the obligation to ensure that VAT is collected in a uniform manner in all the Member States. ⁷

9The Court therefore ruled that, by providing for a general and indiscriminate waiver of verification of taxable transactions effected in a series of tax years, Italy had failed to fulfil its obligations under Articles 2 and 22 of the Sixth Directive and Article 10 EC.

Italian law

10Until 1 April 1996, tax disputes in Italy were heard by first- and second-instance tax courts at local and provincial level, with a final appeal to the Commissione Tributaria Centrale sitting in Rome. As from 1 April 1996, ⁸ that system was replaced by regional and provincial tax courts, with an appeal to the Corte di Cassazione (Court of Cassation). The Commissione Tributaria Centrale was, in principle, abolished. No new appeals could be made to it but it continued to sit, in regional or provincial sections, until such time as all proceedings pending before it on that date were dealt with. That time has yet to come. ⁹

11The provision with which the referring court is concerned ¹⁰ entered into force on 26 May 2010. It reads as follows:

‘In order to ensure that judicial proceedings in tax matters are kept within a reasonable time, as required by the [European Convention on Human Rights, “ECHR”], pending tax disputes arising from actions lodged at first instance more than 10 years before the date of entry into force of the law converting the present decree into law, in which the State Tax Authority has been unsuccessful both at first and second instance, shall be concluded, on the ground of failure to comply with the “reasonable time” requirement laid down in Article 6(1) of that convention, in accordance with the following rules:

tax disputes pending before the Commissione Tributaria Centrale, with the exception of those concerning claims for reimbursement, shall be concluded automatically by order of the president of that court or of another member designated for that purpose …;

tax disputes pending before the Corte di Cassazione may be extinguished by payment of an amount equivalent to 5% of the value of the claim … with concurrent abandonment of any claim to fair compensation within the meaning of Law No 89 of 24 March 2001. [ ¹¹] The taxpayer may lodge an application to that effect with the relevant secretariat or registry within 90 days of the entry into force of the law converting the present decree into law, accompanied by proof of the relevant payment. The proceedings referred to in this paragraph shall be suspended until the expiry of the time-limit set out in the second sentence hereof and shall be concluded with an order apportioning the full costs of the proceedings. In no event shall there be any reimbursement. …’

Facts, procedure and question referred

12In its 1980 VAT return, Belvedere Costruzioni Srl (‘Belvedere’) claimed a credit of ITL 24 288 000. It filed its 1981 return late, on 8 April 1982. In its 1982 return, it deducted ITL 22 264 000, ¹² indicating that sum as a VAT credit from the 1981 return.

13In August 1985, the tax authority reassessed Belvedere for 1982 on the ground that the company had filed its 1981 return out of time and that the credit of ITL 22 264 000 could therefore not be deducted.

14Before the first-instance tax court, Belvedere argued that the claim arose not from the 1981 tax year, but from the credit shown in its 1980 return. Where VAT has been overpaid in a particular year, it submitted, the right to deduct it in subsequent years is extinguished only where there has been a failure both to calculate VAT liability during the relevant period and to present a statement of account with the annual return. Since there had been no such failure on Belvedere’s part, it could still, in its 1982 return, deduct the credit showing from the 1980 return.

15The tax authority contended that the 1981 return, having been filed out of time, was without effect. There had thus been in that year neither an application for a refund nor an expression of the company’s intention to deduct a credit in 1982. The deduction in the 1982 return of a credit not shown in a valid return for 1981 was therefore unlawful.

16In October 1986, the first-instance tax court gave judgment in favour of Belvedere. In May 1990, the second-instance court dismissed the tax authority’s appeal. In July 1990, that authority brought a further appeal before the referring court. In 2008, it reiterated its interest in maintaining the appeal. The arguments of both parties are essentially the same as in the courts below.

17In September 2010, the Commissione Tributaria Centrale referred a question to the Court of Justice. Under the disputed provision, it must conclude the proceedings automatically by an order which will acquire the authority of res judicata and will definitively extinguish a claim advanced by the tax authority at three levels of court proceedings. In the light of the judgment in Case C-132/06, the referring court wonders whether that is permitted by EU law. It therefore seeks a ruling on the following question:

‘Do Article 10 EC, now Article 4 TEU, and Articles 2 and 22 of [the Sixth Directive], preclude rules of Italian legislation, laid down in Article 3(2bis) of Decree-Law No 40 of 25 March 2010, converted into Law No 73 of 22 May 2010, under which the court with jurisdiction in tax matters may not rule on the existence of an alleged tax debt which the tax authority has sought, in due time, to recover by appealing against an unfavourable decision and which thus in effect provides for the VAT debt claimed to be wholly waived where the courts have ruled at both first and second instance that such a debt does not exist, without the taxable person in favour of whom the waiver has operated having to pay even a portion of the debt claimed?’

18Written and oral submissions have been made by the Italian Government and the Commission.

Preliminary issues

Relevant EU legislation

19The main proceedings concern the VAT years 1980 to 1982. Because no new appeals have been brought before the Commissione Tributaria Centrale since 1996, all the disputes affected by the disputed provision concern years before that date. I therefore agree with the Commission that any duty imposed on the Member State by the EU legislation on VAT arises under the Sixth Directive rather than under Directive 2006/112, which has applied only since 1 January 2007.

20As regards the relevant Treaty provision — Article 10 EC or Article 4(3) TEU — the position may be less clear-cut, as the disputed provision was enacted in May 2010, after the entry into force of the Lisbon Treaty. However, since the two articles lay down essentially the same positive and negative obligations, the distinction is purely formal.

Relevant Italian legislation

21Article 3(2bis)(a) and (b) of the converted decree-law lay down appreciably different conditions governing the conclusion of proceedings, according to whether they are pending before the Commissione Tributaria Centrale or the Corte di Cassazione. Inter alia, in the former case proceedings are automatically concluded without any payment of tax whereas in the latter they may be concluded on application made within 90 days, and 5% of the amount disputed must be paid by the taxable person. ¹³

22The present request for a preliminary ruling concerns only subparagraph (a). The permissibility of the rules under (b) does not arise. That aspect has been raised in another reference to the Court, ¹⁴ which, however, concerns not VAT, a tax subject to EU harmonisation, but a non-harmonised direct tax on dividends applied, apparently, to a company established outside the EU.

23While subparagraph (b) may provide, in some regards, an instructive comparison with subparagraph (a), it seems to me important to avoid conflating the two. In particular, I would not, as the Commission does, place any reliance in the context of the present case on the way in which the Corte di Cassazione has described or interpreted subparagraph (b) in its order for reference in that other case.

Relevant aspects of the main proceedings

24The dispute in the main proceedings concerns a taxable person’s right to carry forward a claimed VAT credit to the second year after that in which it allegedly arose, where the tax return for the intervening year was not submitted in good time. The legal issue appears to involve the relative weight to be accorded to each of two, possibly partly conflicting, procedural provisions of Italian VAT legislation.

25The merits of that dispute are, however, extraneous to the question referred, and it is of no relevance to consider whether Belvedere or the tax authority should be (or have been) successful.

26What is relevant is that the proceedings were commenced at first instance more than 10 years before the entry into force of the disputed provision (although that is a condition necessarily satisfied by any appeal currently before the Commissione Tributaria Centrale, since no new appeals have been possible since 1996) and that the tax authority has been unsuccessful at both first and second instance. The criteria in the disputed provision for automatic conclusion of the proceedings before the Commissione Tributaria Centrale are therefore satisfied. The issue to be addressed is whether such automatic conclusion on the basis of those criteria is compatible with EU law.

27The Commission has remarked that the first-instance court devoted only eight lines of reasoning to its decision in favour of Belvedere while the first appeal court expressed its reasoning in four lines.

28Again, that circumstance seems irrelevant to the question raised, which concerns all cases before the Commissione Tributaria Centrale. Nor does it appear particularly significant in any other regard, since the tax authority’s first appeal itself contained only 12 lines of legal argument (expanded to 24 lines in its second appeal).

Summary outline of the submissions on the substance

29The Commission considers it necessary to proceed on the basis of the referring court’s interpretation of the disputed provision in the question referred, namely that it ‘in effect provides for the VAT debt claimed to be wholly waived’ where the criteria set out in the disputed provision are met.

30On that basis, it submits that the disputed provision is a general waiver of the kind censured by the Court in Case C-132/06 and, for essentially the same reasons as those set out in that judgment, is precluded by EU law. Under the disputed provision, it argues, a whole category of claims by the tax authorities is simply wiped out, without any evaluation of individual circumstances. However, the Commission stated at the hearing that no infringement proceedings had been initiated against Italy in respect of the disputed provision.

31The Italian Government submits that, unlike the amnesty in issue in Case C-132/06, the disputed provision is a purely procedural rule relating to proceedings before the tax courts, operating downstream of the State’s exercise of its powers and performance of its obligations with regard to the verification and collection of sums due by way of VAT. While the Court is in principle bound by the national court’s interpretation of national law, the order for reference in this case is defective in that it fails to explain why the disputed provision is to be regarded as a general waiver. The Court should therefore take account of the Italian Government’s own explanation.

32In the alternative, the Italian Government submits that, unlike the amnesty in Case C-132/06, the disputed provision does not seriously disrupt the proper functioning of the common system of VAT or the principle of fiscal neutrality, nor does it place taxable persons who are guilty of tax evasion in a more favourable position. ¹⁵ On the contrary, it applies only in cases where the need to respect the requirement of a timely settlement of disputes laid down in the ECHR and the concern to disencumber a court system overloaded with increasingly long-pending proceedings outweigh the diminishing public interest in pursuing tax claims which have already been rejected at first and second instance.

Assessment

Interpretation of the disputed provision

33While interpretation of the disputed provision is a matter for the national courts, I do not agree that this Court is rigorously bound by the description of that provision in the question referred as wholly waiving the VAT debt claimed. The effect of the provision can be ascertained from its wording. What the referring court wishes to know is whether that effect can be regarded as ‘a general and indiscriminate waiver of verification of taxable transactions’ within the meaning of the judgment in Case C-132/06, or as sufficiently similar to such a waiver to be equally precluded by EU law. The question does not presume that the disputed provision can be so regarded. Had it done so, the referring court’s own interpretation would already have provided the answer.

34If, however, the Court were to consider itself bound by that interpretation, it would have to answer the question in the affirmative.

Comparison with the provisions in issue in Case C-132/06

35The effect of the disputed provision appears appreciably different from that of the provisions in issue in Case C-132/06.

36The latter ¹⁶ essentially granted broad immunity from assessment or investigation by the tax authorities in respect of amounts of VAT which had not been declared in good time, in exchange for a payment varying from half the amount subsequently declared as due to a purely token amount of tax. As the Court stated, ¹⁷ they had the effect that ‘taxable persons who [were] guilty of tax evasion [were] placed in a more favourable position’. The Court further considered ¹⁸ that, ‘by introducing an amnesty measure very shortly after the expiry of the deadlines by which taxable persons should have paid VAT and by requiring payment of an amount which is paltry as compared with the VAT actually due, the measure in question enables the taxable persons concerned to escape once and for all their VAT obligations, despite the fact that the national tax authorities would have been able to detect at least some of those taxable persons during the four years preceding the date after which recovery of the tax normally payable would be time-barred. In so doing, Law No 289/2002 undermines the responsibility incumbent on each Member State to ensure the correct levying and collection of the tax.’

37The same cannot be said of the disputed provision here. As the Italian Government and the Commission agree, it applies to the judicial phase and not to the administrative phase for which the tax authorities are responsible. Its procedural nature is underlined by the fact that it applies not simply to VAT, as was the case of the provisions in issue in Case C-132/06, but to appeals relating to all kinds of tax before the Commissione Tributaria Centrale. There is no immunity from investigation or assessment by the tax authorities. All cases concerned had been investigated, and the amounts considered due had been claimed, before the disputed provision was enacted. That provision puts a term to the tax authority’s final appeal against an adverse judicial decision, but does not specifically benefit those who have been guilty of tax evasion. Indeed, it seems unlikely (one hopes particularly unlikely) that such persons would twice be successful before the courts in a dispute with the tax authority — not only at first instance but on appeal. Finally, the disputed provision entered into force more than 14 years after the last date on which final appeal proceedings could have been lodged, not ‘very shortly after the expiry of the deadlines by which taxable persons should have paid VAT’. ¹⁹

38It is therefore not possible to assert that the disputed provision ‘undermines the responsibility incumbent on each Member State to ensure the correct levying and collection of the tax’ in the same way as did the provisions at issue in Case C-132/06.

Duties of the Member States

39The Commission stresses the Member States’ duties ‘to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory’, ‘to ensure compliance with the obligations to which taxable persons are subject’, ‘to ensure effective collection of the Community’s own resources’ and ‘not to create significant differences in the manner in which taxable persons are treated’. ²⁰

40Such duties cannot, however, extend to ensuring that, as a general rule, the tax authorities may continue appealing against judicial decisions until a favourable decision is obtained. Nor does any principle of EU law require more than one appeal to be available. This Court itself is an example, for certain types of proceeding, of a court of first and last instance. In certain other legal systems, there is no absolute right to appeal, and leave to appeal may rarely be granted to a party who has been unsuccessful before two successive courts. In any system, there must come a point at which no further appeal is available. In no system is there a guarantee that the final decision will be incontrovertibly correct in law.

41The disputed provision puts a term to the tax authority’s final appeal after adverse decisions at first and second instance. It concerns, therefore, a situation in which that authority has taken what may be deemed appropriate measures for ensuring collection of VAT which it considers due, but in which a first instance and an appeal court have both ruled that the VAT claimed was not in fact due. I cannot accept that such a measure represents in itself a failure on the part of the Member State to ensure proper enforcement of the VAT system.

42At the hearing, the Commission agreed that there was no general duty on a Member State to ensure that the tax authority may bring a second appeal in VAT disputes, but submitted that, where such an appeal is normally available, it is not permissible for an arbitrarily defined subset of appeals to be ‘decapitated’ after having been lodged but before they can be determined.

43It seems to me that the disputed provision does not concern an arbitrarily defined subset of appeals. It concerns all appeals before the Commissione Tributaria Centrale in which the tax authority has been unsuccessful at first and second instance, in all of which proceedings have been pending for more than 10 (in practice, 14) years. The Member State’s duty under Article 22 of the Sixth Directive to ensure that VAT is correctly assessed and collected implies compliance within a much shorter period. ²¹ It may well be argued that, by not ensuring that disputes over assessment were determined within a reasonable time after VAT should have been definitively accounted for, despite two judicial decisions in favour of the same party, Italy was failing in that duty. It cannot, in my view, be argued that it has failed in its duty by concluding such disputes after 14 years in the only way which could not involve injustice to the party in whose favour those previous judgments were given. (I stress that these remarks concern the disputed provision itself, and not the different provision which applies to appeals before the Corte di Cassazione, or to the relationship between the two.)

44The Commission also referred to the Court’s judgments in Lucchini ²² and, more particularly, Fallimento Olimpiclub. ²³ Both cases concerned the application of the res judicata principle in Italian law. In Lucchini, the Court found that EU law precluded the application of a national provision seeking to lay down that principle if its application prevented the recovery of State aid found by the Commission, in a decision which had become final, to be incompatible with the common market. In Fallimento Olimpiclub, referring to Lucchini, it held that application of the same provision was precluded in a VAT dispute relating to a tax year in respect of which no final judicial decision had yet been delivered, where such application would prevent the national court from taking into consideration the EU rules concerning abusive practice in the field of VAT. The Commission seeks to draw a parallel between those precluded applications of the res judicata principle and the disputed provision, in so far as the latter appears to accord the authority of res judicata to the decision of the first appeal court while withdrawing any question of compatibility with EU law from (what would otherwise have been) the final appeal court.

45I do not find that parallel valid. The situation in Lucchini was highly specific; the matters at issue were principles governing the division of powers between the Member States and the Community in the area of State aid, the Commission having exclusive competence to assess the compatibility with the common market of a national State aid measure. And Fallimento Olimpiclub, although a more closely related case in that it concerned VAT, was decided on the specific issue of whether it was compatible with the principle of effectiveness to interpret res judicata as meaning that, in VAT disputes, where a final judgment in a given case concerned a fundamental issue common to other cases, it had binding authority as regards that issue, even if its findings were made in relation to a different tax period. Neither of those situations, nor any comparable situation, prevails in the present case, which should be decided in the light of its own specific features.

46The Commission has further emphasised that VAT forms the basis of one of the EU’s ‘own resources’, for the effective collection of which the Member States are responsible. ²⁴

47That is of course true. The VAT-based own resource is set at 0.3% of a harmonised VAT assessment base for each Member State. ²⁵ Since the theoretical harmonised base is in fact calculated back from amounts actually collected, ²⁶ effective collection by the Member States affects EU budget revenue.

48However, the requirement of effective collection cannot be absolute. The cost and likelihood of collection must be weighed against potential revenue. With regard to the disputed provision, there would be a cost not only, for the tax authority, in pursuing the proceedings but also, for the State, in maintaining the Commissione Tributaria Centrale in existence for, foreseeably, a very long time. The likelihood of collection is affected not only by the fact that two judicial rulings have been unfavourable to the tax authority but also simply by the passage of time, which may have rendered some amounts incapable of recovery even in the case of a subsequent favourable ruling. In addition, the duty to collect must be weighed against the duty to allow the taxable person to close his accounts within a reasonable time after the end of each VAT period. Where a dispute has been pending for a considerable period, there will inevitably come a point at which such considerations must outweigh the duty to pursue all VAT claims. The criteria set out in the disputed provision do not appear unreasonable in that context.

Comparison with Article 16 of Law No 289/2002

49The Commission refers to case-law of the Corte di Cassazione concerning Article 16 of Law No 289/2002, Articles 8 and 9 of which were the subject-matter of the Commission’s action in Case C-132/06 and were found by the Court to be incompatible with EU law. Article 16 allows the taxpayer to obtain closure of any pending proceedings before any tax court on payment of 10% of the amount in dispute, or of EUR 150 if the amount in dispute is less than EUR 2 000. The Corte di Cassazione has found that article to be tainted by the same incompatibility as Articles 8 and 9 of Law No 289/2002. The Commission submits that such a finding is relevant when assessing the disputed provision which, it claims, is ‘practically identical’.

50The compatibility with EU law of Article 16 of Law No 289/2002 is not in issue in these proceedings, and it is not for the Court to express a view at this juncture. However, I note that it presents at least one significant difference in relation to the disputed provision, in that it applies to all pending proceedings before all tax courts, regardless of duration. It thus seems considerably more like a ‘general waiver’ than does the disputed provision, which applies only to third-instance proceedings when the proceedings as a whole have been pending for more than 10 (in practice, 14) years. I do not, therefore, think that any national case-law concerning Article 16 of Law No 289/2002 can be considered relevant for present purposes.

Comparison with case-by-case settlements

51The Commission emphasises that the disputed provision entails conclusion of all disputes concerned, without regard to any likelihood of a ruling in favour of the tax authority. It contrasts that with other provisions of Italian law which allow judicial settlement of disputes between the tax authority and the taxable person on the basis of an individual assessment of the dispute by the authority, and/or of payment by the taxable person of a proportion of the amount claimed. The disputed provision embodies, in the Commission’s view, a general waiver within the meaning of the judgment in Case C-132/06 rather than a case-by-case settlement, which it appears to consider acceptable.

52I am unconvinced by that submission.

53Admittedly, a party who has been unsuccessful at first instance and on a first appeal may succeed on a second appeal. Moreover, such a party will normally assess, with greater or lesser accuracy, his interests and chances of success before lodging a second appeal. A public entity such as a tax authority may also wish, on more general grounds of legal certainty, to obtain a final appeal ruling in the public interest.

54On the one hand, the disputed provision seems in effect to replace the tax authority’s estimation of its interest in pursuing the case by a quasi-statistical approximation of the likelihood of a change of ruling on appeal. Where that likelihood is small, as seems to be contemplated by the disputed provision, the absence of a final appeal ruling, while not ideal, appears less problematic.

55On the other hand, a negotiated case-by-case settlement, whereby the tax authority renounces its claim to the full amount which it considers due in exchange for payment of part of that sum, does not appear a more virtuous approach. It yields, necessarily, either more or less tax than should have been collected on a correct interpretation of the relevant legislation, while still relinquishing any possibility of a ruling on that interpretation by the court of final appeal.

56Both options are less than ideal in terms of collecting all the tax that is due, but neither seems either unacceptable or comparable to a general waiver within the meaning of the judgment in Case C-132/06.

Justification on the basis of the ECHR

57By contrast, the need to comply with the ‘reasonable time’ requirement in Article 6(1) of the ECHR ²⁷ (and Article 47 of the Charter of Fundamental Rights of the EU, which applies to the Member States when they are implementing EU law) does appear to be a clear and especially powerful justification for a rule such as that in the disputed provision. With regard to the requirements of legal certainty, 10 years seems a particularly long time for judicial proceedings to be pending, unless justified by the specific circumstances of the case. ²⁸ The disputed provision applies, in practice, only to proceedings which in April 2010 were at third instance and had been pending for 10 (in practice, 14) years or more, and whose overall duration has thus been appreciably longer. Whilst the mere fact of such duration is obviously a serious problem to be tackled by the Member State, ²⁹ I do not think that the EU law obligation to ensure effective collection of VAT can require maintaining for more than 10 or 14 years a situation of legal uncertainty as regards a disputed amount of tax in relation to which the taxable person has already received two favourable judgments.

58On the basis of all the above considerations, therefore, I take the view that the disputed provision in the present case is not comparable to those in issue in Case C-132/06 and does not represent a failure on Italy’s part to ensure proper application of the VAT system.

Requirement of fiscal neutrality

59However, one aspect of the disputed provision appears questionable in the light of — inter alia — the Court’s judgment in Case C-132/06, in relation to the requirement of ‘fiscal neutrality’, namely, the obligation ‘not to create significant differences in the manner in which taxable persons are treated, either within a Member State or throughout the Member States’. ³⁰

60The Commission raises that aspect by asking why, if the aim of Article 3(2bis) of the converted decree-law was really to reduce the backlog of cases before the Commissione Tributaria Centrale and the Corte di Cassazione, it applied only to proceedings which had been pending for more than 10 years on a particular date, rather than all proceedings, as of such time as they reached the 10-year limit.

61That question does not seem to me to be appositely put in the context of the present case which, it must be recalled, concerns only cases before the Commissione Tributaria Centrale. When the disputed provision came into effect, all appeals before that court concerned proceedings which had been pending for more than 10 years, and no further appeals could be brought before it.

62None the less, Article 3(2bis) as a whole does create a difference in treatment between final appeals in VAT proceedings, depending essentially on the date on which they were lodged rather than on the length of time for which they have been pending. ³¹ And, while a 10-year criterion may be regarded as an objective (though, as for any time-limit, arbitrary) distinguishing feature when viewed in the light of the ‘reasonable time’ requirement in Article 6(1) of the ECHR and Article 47 of the Charter of Fundamental Rights, it does not seem acceptable for that criterion to have differing effects depending simply on the date on which the final appeal was lodged.

63Yet I do not consider that a sufficient ground for judging the disputed provision to be incompatible, in itself, with Italy’s duty to ensure effective collection of VAT and effective compliance by taxable persons with their obligations under the VAT system. What might be required is uniform treatment of all the situations covered by Article 3(2bis) of the converted decree-law, at least in so far as they concern VAT. If appeals pending before the Corte di Cassazione were to be treated in the same way as those before the Commissione Tributaria Centrale, whenever the duration of the proceedings reached the 10-year limit, such a difficulty might be eliminated. The same might be true also if the treatment currently afforded to appeals before the Corte di Cassazione were to be extended to those before the Commissione Tributaria Centrale. However, I do not think that it is for the Court to express a view on either approach, or on any other, in the context of this reference for a preliminary ruling. Such considerations are not relevant to the question whether a measure such as the disputed provision is, when viewed alone, precluded by a correct interpretation of the EU legislation.

Conclusion

64I am therefore of the opinion that the Court should answer the question raised by the Commissione Tributaria Centrale to the following effect:

A national provision under which, in value added tax disputes between a taxable person and the tax authority, when 10 years have elapsed since proceedings were brought at first instance, a second appeal by the tax authority following judgments against it both at first instance and on a first appeal is automatically concluded without a decision on the substance by the second appeal court, is not precluded either by Article 4(3) TEU (Article 10 EC) or by Articles 2 and 22 of 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.

¹ Original language: English.

² Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).

³ 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, amended on numerous occasions).

⁴ See now Article 2(1)(a) and (d) of Directive 2006/112.

⁵ Article 22 was replaced as from 1 January 1993 by Article 28h (Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value added tax and amending Directive 77/388/EEC with a view to the abolition of fiscal frontiers, OJ 1991 L 376, p. 1), without substantive change to the provisions cited. See now Articles 252(1), 206 and 273 of Directive 2006/112.

⁶ [2008] ECR I-5457.

⁷ Paragraphs 43 and 44 of the judgment.

⁸ Legislative Decree No 545/1992.

⁹ It appears that nearly 211000 appeals were still pending in October 2010, but that it is hoped to bring all proceedings before the Commissione Tributaria Centrale to an end by 31 December 2012, enabling that body to be definitively wound up.

¹⁰ Article 3(2bis) of Decree-Law No 40/2010, converted into law by Law No 73/2010, which introduced Article 3(2bis). Article 3 is entitled ‘Reduction of litigation and rationalisation of collection’. I shall refer to Article 3(2bis), first sentence and subparagraph (a), as ‘the disputed provision’.

¹¹ The so-called ‘Pinto Act’, which provides a mechanism for claiming compensation in respect of the excessive length of judicial proceedings, introduced following a series of highly critical judgments by the European Court of Human Rights.

¹² Equivalent to approximately EUR 11 500.

¹³ See point 11 above.

¹⁴ Case C-417/10 3M Italia, in which a hearing was held immediately prior to that in the present case.

¹⁵ See paragraphs 44, 45 and 47 of the judgment in Case C-132/06.

¹⁶ See the summaries at paragraph 8 et seq. of the judgment, and at point 11 et seq. of my Opinion, in that case.

¹⁷ At paragraph 47 of its judgment.

¹⁸ At paragraph 52 of its judgment.

¹⁹ And the present case concerns a claim for a credit which arose (or did not arise) some 30 years ago.

²⁰ See paragraphs 37 to 39 of the judgment in Case C-132/06, cited in point 7 above.

²¹ Article 22(4) and (5) of the Sixth Directive required taxable persons to submit a return within two months from the end of each tax period, which could not exceed a year, and to pay the net amount of VAT when submitting the return.

²² Case C-119/05 [2007] ECR I-6199.

²³ Case C-2/08 [2009] ECR I-7501.

²⁴ See the 2nd and 14th recitals in the preamble to the Sixth Directive, and paragraph 39 of the judgment in Case C-132/06.

²⁵ See Article 2 of Council Decision 2007/436/EC, Euratom of 7 June 2007 on the system of the European Communities’ own resources (OJ 2007 L 163, p. 17).

²⁶ See European Union public finance, fourth edition (EU Publications Office, 2008), p. 239.

²⁷ The European Court of Human Rights has repeatedly found procedural delays in Italy, of shorter duration than 10 years, to infringe Article 6(1) ECHR (see, for example, Sciortino v. Italy, no. 30127/96 (Sect. 2) (18.10.01), paragraph 19 et seq., and Scordino v. Italy (no. 1) [GC], no. 36813/97, ECHR 2006-V, paragraph 175 et seq.).

²⁸ In the context of proceedings before the EU Courts, see, for example, Case C-385/07 P Der Grüne Punkt [2009] ECR I-6155, paragraph 181 et seq.

²⁹ See footnote 9 above.

³⁰ Paragraph 39 of the judgment.

³¹ In fact, there is a threefold distinction: appeals before the Commissione Tributaria Centrale are treated differently from those before the Corte di Cassazione, and appeals before the latter are treated differently according to whether proceedings were initiated at first instance before or after 26 May 2000.