C-823/79 Carciato

JUDGMENT OF THE COURT (FIRST CHAMBER)

OF 9 OCTOBER 1980

Criminal proceedings against Giovanni Carciati (preliminary ruling requested by the Tribunale Civile e Penale, Ravenna)

"Free movement of goods — Temporary importation of motor vehicles"

Case 823/79

Free movement of goods — National rules prohibiting residents from using vehicles admitted under a scheme for temporary importation — Compatibility with the EEC Treaty

The rules of the EEC Treaty relating to criminal penalties, on the use of motor the free movement of goods do not vehicles admitted under a scheme for preclude the imposition by national rules temporary importation and thus exempt on persons residing in the territory of a from payment of value added tax. Member State of a prohibition, subject to

In Case 823/79,

REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunale Civile e Penale [Civil and Criminal Court], Ravenna, for a preliminary ruling in the criminal proceedings pending before that court against

GIOVANNI CARCIATI

on the interpretation of the Community rules applicable in respect of the free movement of goods, THE COURT (First Chamber)

composed of: T. Koopmans, President of Chamber, A. O'Keeffe and G. Bosco, Judges,

Advocate Generai: F. Capotorti Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues The facts of the case, the course of the procedure and the observations submitted in accordance with Article 20 of the Statute of the Court of Justice of the EEC may be summarized as follows.

I — Facts and written procedure

A — The facts of the case and the customs territory a motor car registered abroad in infringement of the provisions governing temporary importation.

In the course of the proceedings against Mr Carciati the Tribunale di Ravenna decided by an order dated 26 November 1979 to suspend the proceedings and to ask the Court under Article 177 of the EEC Treaty to give a ruling on the compatibility of the Italian rules question submitted for a preliminary ruling

Mr Fink, a German national, had entrusted a motor car registered in Germany in the name of his company Fink GmbH, to Mr Carciati, an Italian national residing in Ravenna, for him to use in Italy on his frequent business visits. In March 1978 Mr Carciati was seen driving the car; as a result he was charged with smuggling on the ground that, being a resident, he had in his possession and used within the Italian

2774 prohibiting Italian residents from using cars brought in under the temporary importation arrangements and providing penal sanctions for breach of that prohibition, with the provisions on the free movement of goods. The question referred to the Court by the Tribunale for a preliminary ruling is as follows :

"Are Articles 25, 216, 282, 287 and 339 of the Decree of the President of the Republic No 43 of 23 January 1973, in conjunction with Law No 1163 of 27 October 1957 ratifying and implementing the International Convention of New York of 4 June 1954, and Articles 67, 69, 70 and 71 of the Decree of the President of the Republic No 633 of 26 October 1972 in conflict with the Community rules in relation to the free movement of goods?"

B — The legislation applicable

(a) The international conventions

The customs and fiscal facilities relating to journeys by private car are governed at international level by two agreements made under the auspices of the United Nations.

The Customs Convention of New York of 4 June 1954 (United Nations Treaty Series, Volume 282, p. 249) provides that vehicles belonging to persons normally resident outside the country may be granted admission without payment of taxes and customs duties and all dues and payments payable on importation if they are imported and utilized, on the occasion of a temporary visit, by their owners or by other persons resident outside the territory. According to Article 2 (1) of that Convention:

"Each of the Contracting States shall grant temporary admission without payment of import duties and import taxes and free of import prohibitions and restrictions, subject to re-exportation and to the other conditions laid down in this Convention, to vehicles owned by persons normally resident outside its territory which are imported and utilized, for their private use on the occasion of a temporary visit, either by the owners of the vehicles or by other persons normally resident outside its territory."

That Convention has been ratified by all the Member States of the European Communities.

The Geneva Convention of 18 May 1956 (United Nations Treaty Series, Volume 339, p. 3) on the taxation of private road vehicles in international traffic exempts vehicles registered in the territory of one of the Contracting Parties and imported duty-free into another State from taxes and charges levied on the circulation or possession of vehicles with the exception, however, of tolls or of taxes or charges on consumption. The Convention does not define directly the conditions to be met in order to gain exemption, but refers to the provisions of the New York Customs Convention. It was ratified by all the Member States of the European Communities, with the exception of Belgium and Italy.

Those Conventions apply only to foreign vehicles imported and utilized by persons who are resident abroad.

(b) The Italian rules governing the temporary importation of motor vehicles

Decree of the President of the Republic No 43 of 23 January 1973 contains the consolidated text of the legislative provisions on customs matters. Article 216 concerns the temporary importation of vehicles for private use and provides, in particular, in relation to the utilization on the territory of the State of vehicles admitted under the arrangements for temporary importation, that the penalties prescribed in respect of the offence of smuggling remain applicable when the conditions laid down in the New York Convention, referred to above, are lacking or are no longer present.

Decree of the President of the Republic No 633 of 12 October 1972 concerns the introduction and administration of value added tax (VAT).

(c) The proposal for a Community directive

On 30 October 1975 the Commission submitted to the Council a Proposal for a Directive on tax exemptions for certain means of transport temporarily imported into one Member State from another (Official Journal C 267 of 21 November 1975, p. 8). The proposal is at present being considered by the Council.

The purpose of the proposal is to improve intra-Community travel. Compared with the international agreements, it provides for various improvements, in particular the extension of the exemptions to utilization of the vehicle for business purposes, the abolition of temporary importation papers, the determination of common rules for establishing residence and the fixing of a uniform duration for the exemption (six months in any twelve months).

Article 3 of the Proposal for a Directive provides that the individual importing the vehicle must have his principal residence in a Member State of the Community other than that of temporary importation and that the means of transport must not be disposed of or hired out in the Member State of temporary importation, or lent to a resident of that State. The only exception allowed concerns cars belonging to a

2776 car-hire firm having its head office in the Community, which may be brought back into the Member State where it was originally hired by an employee of the car-hire firm even if such employee is resident in the Member State of temporary importation.

C — Procedure

The order of the Tribunale di Ravenna was received at the Court Registry on 21 December 1979.

The Italian Government, represented by Dante d'Avanzo, Avvocato dello Stato, and the Commission of the European Communities, represented by Eugenio de March, a member of its Legal Department, acting as Agent, submitted written observations under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC.

Upon hearing the report of the Judge-Rapporteur and the opinion of the Advocate General the Court decided to open the oral procedure without any preparatory inquiry and to assign the case to the First Chamber of the Court.

II — Written observations submitted to the Court

A — Admissibility

In its observations the Commission notes that although the Court has no jurisdiction under Article 177 of the Treaty to rule on the compatibility of a provision of national law with Community law, it is a matter of settled case-law that it may elicit from the wording of the question which has been referred to it by the national court, in the light of the information supplied by the latter, such matters as are relevant to the interpretation of Community law.

The case-file reveals, according to the Commission, that a solution to the dispute in the main proceedings turns on the compatibility of national rules prohibiting residents from using motor vehicles subject to the temporary importation arrangements and prescribing penal sanctions for contravention of that prohibition with the provisions on the free movement of goods.

E — Substance

The Commission and the Italian Government maintain in their observations that the temporary importation scheme in force in Italy is not incompatible with the provisions of the Treaty on the free movement of goods.

The Commission states that the prohibition against the use by residents of a vehicle registered abroad is merely a means of preventing tax frauds and of guaranteeing, in particular, that taxes will in fact be paid in the country of destination of the goods. The only principle concerned with the free movement of goods which Member States are bound to respect is that which prohibits discrimination between national products and imported products and is expressed in Articles 13 and 95 of the Treaty. Hence the Italian provisions referred to in the order of the Tribunale di Ravenna are not contrary to the Treaty provisions on the free movement of goods. Furthermore, the Commission points out that the harmonization of temporary importation arrangements which is the subject of the proposal for a Community directive is intended not so much to encourage trade in goods as to facilitate the movement of persons and services, that is to say, of the residents of a Member State who intend to use their car in another Member State and for whom the national tax provisions might cause grave problems (commercial agents, frontier workers and so on).

The Italian Government states that the mere fact that all the Member States of the EEC have ratified the international Convention at present applicable in respect of private vehicles travelling between the Member States of the Community is clear evidence that there is no conflict such as that perceived by the Italian court between the Italian rules and the Community provisions applicable on the subject.

Furthermore, penal provisions (including the provisions in Articles 25, 216, 282, 287 and 339 of Decree of the President No 43 of 1973) lie within the exclusive competence of the Member States, whose sovereign right it is to lay down the constituent elements of an offence, including that of smuggling, together with the type and extent of the penalties attaching thereto.

At the sitting on 19 June 1980 the Italian Government, represented by Dante d'Avanzo, Avvocato dello Stato, and the Commission, represented by Eugenio de March, a member of its Legal Department, acting as Agent, presented oral argument.

The Advocate General delivered his opinion at the sitting on 10 July 1980. Decision

Grounds

1By an order of 17 December 1979 which was received at the Court Registry on 21 December 1979, the Tribunale Civile e Penale di Ravenna referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question as to the compatibility of certain provisions of Italian legislation with the Community rules on the free movement of goods.

2The facts which gave rise to the dispute before the Tribunale di Ravenna are as follows. Mr Carciati, an Italian national residing in Ravenna, was stopped by the Guardia di Finanza [the Italian revenue enforcement officers] while driving on Italian territory a car registered in Germany. He stated that a national of the Federal Republic of Germany had entrusted him with the car in order to have it at his disposal in Italy when making his frequent business visits. Mr Carciati was charged with smuggling in that he, being an Italian resident, had in his possession and had used within the national customs territory a motor-car registered abroad, in contravention of the provisions governing temporary importation.

3In the course of the proceedings the Tribunale di Ravenna decided to refer the following question to the Court for a preliminary ruling:

"Are Articles 25, 216, 282, 287 and 339 of the Decree of the President of the Republic No 43 of 23 January 1973, in conjunction with Law No 1163 of 27 October 1957 ratifying and implementing the International Convention of New York of 4 June 1954, and Articles 67, 69, 70 and 71 of the Decree of the President of the Republic No 633 of 26 October 1972 in conflict with the Community rules in relation to the free movement of goods?"

4Whilst the Court has no jurisdiction in proceedings under Article 177 of the Treaty to decide on the compatibility or otherwise of national legislative provisions with Community law it may, when presented with an imprecisely formulated reference, identify the question of Community law in such terms as enable it to give a ruling. In this case, the question to be determined is whether the principles in the Treaty concerning the free movement of goods prevent the adoption of national rules which, whilst subjecting the normal importation of vehicles to payment of value added tax, prohibit the residents of the State in question, subject to criminal penalties, from using vehicles which have been brought in under the temporary importation arrangements and are thus exempted from that tax.

5Article 2 of the New York Convention of 4 June 1954 which has been ratified by all the Member States of the European Community governs the temporary tax-free importation of motor vehicles. Paragraph (1) of that article provides that each of the Contracting States shall "grant temporary-admission without payment of import duties and import taxes . .. to vehicles owned by persons normally resident outside its territory which are imported and utilized, for their private use on the occasion of a temporary visit, either by the owners of the vehicles or by other persons normally resident outside its territory".

6Article 216 of the Decree of the President of the Italian Republic No 43 of 23 January 1973 (Consolidated Text of the Legislative Provisions in Customs Matters) governs the temporary importation of road vehicles for private use by referring to the New York Convention and provides in paragraph (2) that the penalties prescribed for the offence of smuggling apply when the conditions laid down by that Convention are lacking or are no longer present. The same enactment also lays down the fine to be imposed on anyone who is in possession of foreign goods without being able to show that they were lawfully obtained (Article 282 in conjunction with Article 85), or who uses foreign goods which have been imported duty-free and at a reduced rate of tax wholly or partly for a purpose other than that for which the tax exemption or reduction was granted (Article 287).

7As regards the amount of tax not paid, upon which the amount of the fine is based, Decree of the President No 633 of 26 October 1972 on the introduction and administration of value added tax provides that the tax in question applies, inter alia, to imports effected by any person, and goes on to determine specifically, in Articles 67 to 70, the arrangements regarding the tax on imports.

8It should be noted that the application of value added tax to the importation of goods is expressly provided for in Article 2 of the Second Council Directive of 11 April 1967 (No 67/228/EEC) on the harmonization of legislation of Member States concerning turnover taxes (Official Journal, English Special Edition, 1967, p. 16). Article 14 of the Sixth Council Directive of 17 May 1977 (No 77/338/EEC) on this subject (Official Journal 1977, L 145, p. 1) provides that, without prejudice to other Community provisions, Member States are to exempt, under conditions to be laid down by them for the purpose of ensuring the correct and straightforward application of such exemption and of preventing any possible evasion, avoidance or abuse, inter alia, importations of goods declared to be under temporary importation arrangements.

9Member States thus retain broad powers to take action in respect of temporary importation, specifically for the purpose of preventing tax frauds. It follows that if the measures adopted to that end are not excessive, they are compatible with the principle of the free movement of goods.

10As regards the prohibition imposed by a Member State on persons resident in its territory on the use of vehicles imported temporarily tax-free, it is an effective way of preventing tax frauds and ensuring that taxes are paid in the country of destination of the goods. In fact the Proposal for a Council Directive on tax exemptions for certain means of transport temporarily imported into one Member State from another submitted by the Commission . on 30 October 1975 (Official Journal C 267, p. 8) recognized the need for such a measure in proposing in Article 3 (concerning the temporary importation of certain means of transport for private use) the condition that "(a) the individual importing such goods: (aa) has his principal residence in a Member State of the Community other than that of temporary importation, ... "and that "(b) the said means of transport is not disposed of or hired out in the Member State of temporary importation, or lent to to a resident of that State".

n Provided that provisions such as those contained in the national legislation in question in this instance are found to be compatible with the rules of the Community legal order, there is no argument capable of calling in question the power of a Member State to impose criminal penalties for contravening the national rules.

12The reply to the question which has been submitted by the Tribunale di Ravenna should therefore be that the rules of the EEC Treaty relating to the free movement of goods do not preclude the imposition by national rules on persons residing in the territory of a Member State of a prohibition, subject to criminal penalties, on the use of motor vehicles admitted under temporary importation arrangements and thus exempt from payment of value added tax.

Costs

Costs

13The costs incurred by the Italian Government and by the Commission of the European Communities which have submitted observations to the Court are not recoverable. As this case is, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings before the national court, the decision as to 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 Tribunale Civile e Penale di Ravenna by an order dated 26 November 1979, hereby rules:

The rules of the EEC Treaty relating to the free movement of goods do not preclude the imposition by national rules on persons residing in the territory of a Member. State of a prohibition, subject to criminal penalties, on the use of motor vehicles admitted under temporary importation arrangements and thus exempt from payment of value added tax.

Koopmans O'Keeffe Bosco

Delivered in open court in Luxembourg on 9 October 1980.

J. A. Pompe Deputy Registrar For the Registrar T. Koopmans

President of the First Chamber OPINION OF MR ADVOCATE GENERAL CAPOTORTI DELIVERED ON 10 JULY 1980 1 Mr President, Members of the Court,

1. I shall begin by briefly summarizing the facts which lie at the origin of this reference for a preliminary ruling.

In 1976 Gerhard Fink, a national of the Federal Republic of Germany, entrusted to Giovanni Carciati, an Italian national residing in Ravenna, a motor-car licensed in Germany and registered in the name of the Hermann Fink undertaking, in order to be able to make use of it in Italy when making his frequent business visits. In March 1978 Mr Carciati was stopped by members of the Guardia di Finanza [Italian revenue enforcement officers] while driving the

2782 motor-car in question and was charged with importing a motor-car into Italy without paying the appropriate taxes and dues. As a consequence, he had to appear before the Tribunale di Ravenna to answer a charge of smuggling, together with an infringement of the provisions governing value added tax.

In the context of those proceedings the Tribunale referred the following question to the Court of Justice by an order of 23 November 1979:

"Are Articles 25, 216, 282, 287 and 339 of the Decree of the President of the Republic No 43 of 23 January 1973, in conjunction with Law No 1163 of 27 October 1957 ratifying and

Notes

(1) Language of the Case: Italian.

(1) Translated from the Italian.

OPINION OF MR ADVOCATE GENERAL CAPOTORTI

DELIVERED ON 10 JULY 1980 ¹

Mr President,

Members of the Court,

1I shall begin by briefly summarizing the facts which lie at the origin of this reference for a preliminary ruling.

In 1976 Gerhard Fink, a national of the Federal Republic of Germany, entrusted to Giovanni Carciati, an Italian national residing in Ravenna, a motor-car licensed in Germany and registered in the name of the Hermann Fink undertaking, in order to be able to make use of it in Italy when making his frequent business visits. In March 1978 Mr Carciati was stopped by members of the Guardia di Finanza [Italian revenue enforcement officers] while driving the motor-car in question and was charged with importing a motor-car into Italy without paying the appropriate taxes and dues. As a consequence, he had to appear before the Tribunale di Ravenna to answer a charge of smuggling, together with an infringement of the provisions governing value added tax.

In the context of those proceedings the Tribunale referred the following question to the Court of Justice by an order of 23 November 1979:

“Are Articles 25, 216, 282, 287 and 339 of the Decree of the President of the Republic No 43 of 23 January 1973, in conjunction with Law No 1163 of 27 October 1957 ratifying and implementing the International Convention of New York of 4 June 1954, and Articles 67, 69, 70 and 71 of the Decree of the President of the Republic No 633 of 26 October 1972 in conflict with the Community rules in relation to the free movement of goods?”

2I think it convenient to make a brief summary of the content of the international and Italian legal provisions to which the national court has referred in its order.

Article 2 of the New York Convention of 4 June 1954 — ratified by all the Member States of the European Communities — regulates the temporary tax-free importation of motor vehicles; it provides, in paragraph (1), that “Each of the Contracting States shall grant temporary admission without payment of ... taxes ... to vehicles owned by persons normally resident outside its territory which are imported and utilized, for their private use on the occasion of a temporary visit, either by the owners of the vehicles or by other persons normally resident outside its territory”. Article 216 of Decree of the President of the Republic No 43 of 23 January 1973 (Consolidated Text of the Legislative Provisions on Customs Matters), governs the temporary importation of road vehicles for private use by referring to the New York Convention, and provides in particular, at indent 2, that when the conditions laid down in the above-mentioned Convention are lacking or are no longer present “the penalties prescribed for the offence of smuggling remain applicable”. The same Consolidated Text also lays down the fine to be imposed on any person in possession of foreign goods who fails to prove that they have been lawfully obtained (Article 282 in conjunction with Article 25), or who uses “foreign goods which have been imported duty-free and at a reduced rate of (frontier) charges ..., wholly or partly for a purpose other than that for which the tax exemption or reduction was granted” (Article 287). Finally, as to the duty which has not been paid, to the amount of which the fine corresponds, Decree of the President of the Republic No 633 of 26 October 1972, on the introduction and administration of value added tax, provides that the tax in question shall apply, inter alia,“to imports effected by any person” (Article 1), and then lays down, specifically, in Articles 67 to 70, the provisions concerning the tax on imports.

3It is settled that the Court of Justice has no jurisdiction to determine, in rulings based on Article 177 of the EEC Treaty, the compatibility of particular national provisions with Community law. But there is a consistent body of case-law to the effect that it may, when presented with an imprecisely worded reference for a preliminary ruling, identify the question of Community law in terms which enable it to give a ruling. In this case, the general question on which the Italian court is asking for guidance is clearly that of interpreting the fundamental principles in the EEC Treaty on the free movement of goods, and in particular the principles applicable to the rules concerning imports, in order to establish whether they may preclude national rules which, by subjecting the normal importation of motor vehicles to the payment of value added tax, prohibit persons residing in the territory of that State from making use of motor vehicles which have benefited from the arrangements for temporary importation, and thus from the exemption from that tax.

In my opinion the reply should be in the negative, as regards both the imposition of value added tax on the importation of, motor vehicles and the restrictions imposed by national law on the use of a vehicle which has been temporarily imported.

In the first instance I think it is beyond question that the application of VAT to imports of motor vehicles for private use cannot give rise to any conflict with the principles of the Treaty. In that respect I think it is sufficient to recall that the application of VAT to imports is expressly provided for in the Second Council Directive of 11 April 1967 — No 67/228/EEC — on the harmonization of legislation of Member States concerning turnover taxes, Article 2 of which provides that: “The following shall be subject to the value added tax ... (b) the importation of goods”.

As for the prohibition imposed by a Member State on persons residing therein against using vehicles which have been temporarily imported free of tax, that constitutes — as is rightly observed in the Commission's observations — the only truly effective way of preventing tax evasion and of ensuring that the tax is paid in the country of destination of the goods. In fact it is clear that if persons resident in the importing State were also allowed to use motor vehicles imported temporarily tax-free, it would be exceedingly difficult to identify cases of fraud.

However, under the Sixth Council Directive of 17 May 1977, No 77/388/EEC, on the common system of value added tax, the Member States must exempt from value added tax imports of goods under temporary importation arrangements “under conditions which they (the Member States) shall lay down for the purpose of ... preventing any possible evasion, avoidance or abuse” (Article 14). That indicates that the Member States retain wide powers to intervene in relation to temporary importations for the purpose of preventing tax evasion, and that such powers are fully compatible with the principle of the free movement of goods.

A further confirmation of that fact is furnished by the Proposal for a Council Directive on tax exemptions for certain means of transport temporarily imported into one Member State from another which was submitted by the Commission on 30 October 1975 (Official Journal 1975 C 267 of 21 November 1975, p. 8). Article 3 of that proposed directive (on the temporary importation of certain means of transport for private use, including motor-driven road vehicles) lays down that such goods shall be exempted provided that the individual who imports them “(aa) has his ... residence in a Member State of the Community other than that of temporary importation; (bb) employs the means of transport in question for his private use”, and that such means “is not disposed of or hired out in the Member State of temporary importation or lent to a resident of that State”. Similar restrictions are provided for under Article 4 of the same proposal as to the use of private cars imported temporarily for business use.

The body of secondary Community legislation being drafted thus contains restrictions on the use of vehicles temporarily imported free of tax which are substantially the same as those laid down in the above-mentioned rules in the New York Convention.

Lastly, there do not seem to me to be any grounds for doubting that a Member State has the power to impose criminal sanctions for failure to observe the national rules relating to the temporary importation of motor vehicles. In fact, once provisions such as the Italian ones have been recognized as being compatible with the principles of the Community system, it is within the powers of the Member States, in the appropriate circumstances, to make failure to observe such rules an offence.

Conclusion

4In the light of all those considerations I propose that the reply to the question which has been referred to the Court by the Tribunale di Ravenna by the order of 26 November 1979, should be as follows:

The rules of the EEC Treaty relating to the free movement of goods do not preclude the imposition by national rules on persons residing in the territory of a Member State of a prohibition, subject to criminal penalties, on the use of motor vehicles admitted under temporary importation arrangements and thus exempt from payment of value-added tax.

¹ Translated from the Italian.