JUDGMENT OF 12. 12. 1973 — CASE 142/73 MATHES & SCHURR v EINFUHR- UND VORRATSSTELLE GETREIDE

In Case 142/73 Reference to the Court under Article 177 of the EEC Treaty by the Hessisches Finanzgericht (VIIth Senate) for a preliminary ruling in the action pending before that court between

THE COURT composed of: R. Lecourt, President, A. M. Donner (Rapporteur) and M. Sørensen, Presidents of Chambers, R. Monaco, J. Mertens de Wilmars, P. Pescatore, H. Kutscher, C. Ó Dálaigh and A. J. Mackenzie Stuart, Judges, Advocate-General: J. P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

The facts of the case, the subject matter of the request and the views of the parties may be summarized as follows:

I — Facts and procedure

By notice dated 16 December 1968, the Einfuhr- und Vorratsstelle cancelled the refunds which it had awarded to the plaintiff on the basis of the export to third countries of a product described as ‘wheat meal’ under tariff heading 11.02, representing a total amount of 3253670 kg. The exports took place in the period between October 1963 and March 1965. The EVSt based the cancellation of the refunds on the fact that the applicant had taken advantage of the investigation certificate obtained by fraud to export not wheat meal, but a mixed feedingstuff containing bran, for which no refund had been promised.

The plaintiff in the main action contested the view taken by the EVSt, claiming that it did indeed export wheat meal as stated. Moreover, it was of the opinion that the cancellation of a refund could be justified only to the extent that the refund for the export of wheat meal was higher than that available for the export of mixed feedingstuffs containing bran, under tariff heading 23.02. The plaintiff based this opinion upon the ‘difference theory’ (Differenztheorie) developed by the Bundesfinanzhof in its decision of 8 November 1972 in Rheinmühlen v Einfuhr- und Vorratsstelle, Case VII R 98/68.

The Einfuhr- und Vorratsstelle on the other hand took the view that refunds granted on the basis of inexact and fraudulent information should be completely cancelled, since any other arrangement would be contrary to the principle of legal certainty and would encourage the abuse of the refund system. In its opinion, such an interpretation would in particular be inconsistent with the spirit of the refund system.

Finding that a question of interpretation of Community law was involved, the Hessisches Finanzgericht decided to stay the proceedings and referred the following question to the Court of Justice, by order of 18 May 1973:

‘Must Article 20 (2) of Regulation No 19 of the Council of the European Economic Community of 4 April 1962 on the gradual establishment of a common organization for the market in cereals (OJ 1962, p. 933 et seq.) be interpreted as meaning that in the period October 1963 to March 1965 a refund could only be granted for the export of the goods stated in the application for a refund into the third country therein stated, or is an exporter who, with the intention of obtaining a higher refund, has exported goods of lower value than the goods stated in the application for the refund, entitled, after discovery of the fraud, to the refund appropriate to the nature of the exported goods?’

The order making the reference was registered at the Court on 6 July 1972.

Firma Mathes & Schurr, represented by F. Modest of the Hamburg Bar, and the Commission of the European Communities, represented by its legal adviser M. Gilsdorf, submitted written observations pursuant to Article 20 of the Protocol on the Statute of the Court of Justice.

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 enquiry.

II — Observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice

1. firma Mathes & Schurr (plaintiff in the main action) firstly criticizes the terms in which the preliminary question is expressed, believing it to have been formulated so as to give rise to the impression that the plaintiff in the main action is one of those dishonest exporters who obtain the grant of excessive refunds by fraud. The plaintiff then goes on to recount its actions during the period October 1963 to March 1965, in order to show that it conformed strictly to the rules then in force. The main points of its argument may be summarized as follows: (a) When the exports at issue were made no Community provision existed delineating precisely the limit between wheat flour and meal on the one hand, and wheat middlings (bran), on the other. On the other hand, by decree of 16 March 1955 — BGBl. I, p. 99, the Federal Republic of Germany laid down the criterion for the definition of the above mentioned products solely on the basis of their starch content, all products with a starch content greater than 40 % being classified under customs tariff headings 11.01 and 11.02. The plaintiff contends that the product at issue fulfils this criterion. (b) The plaintiff satisfied the legal provisions in relation to evidence as to type, characteristics and composition of the exported product. During the period in question the decrees of 30 July 1963 — BGBl. I, 543 and 24 November, 1964 — BGBl. I, 917, regulated the procedure for the export of the goods. The statements made by the EVSt, according to which the plaintiff in the main action obtained an investigation certificate for the product in question by fraud, are said by the plaintiff to be entirely baseless. They are moreover premature, in that they anticipate the result of an investigation which has not yet been undertaken. (c) At all events the censure of the Finanzgericht is illdirected. In the plaintiff's opinion the European institutions failed to adopt the provisions necessary to allow national authorities to distinguish between the wheat-based products under headings 11.01 and 11.02 and those to be classified under heading 23.02 of the Common Customs Tariff. The plaintiff in the main action merely took advantage of the gap created by this omission on the part of the Community legislature. This could not give rise to any objection at law. As for the question itself, Firma Mathes & Schurr states, firstly, that the difference theory is applied in all cases where the administrative authorities do not accuse the exporter of any fraudulent practice. It is submitted that the Commission too acknowledges this state of affaires. The reply to the question referred should be given in the light of Article 14 of Regulation No 55 of the Council of 30 June 1962 (OJ 1962, p. 1583), and of Articles 14 to 16 of Regulation No 141/64 of the Council of 21 October 1964 (OJ 1964, p. 2666), read in conjunction with Article 20 (2) of Regulation No 19/62. It is clear from the case law of the Court in Cases 6/71, Rheinmühlen, Rec. 1971, p. 821, and 85/71, Kampffmeyer, Rec. 1972, p. 213, that Regulation No 19/62 makes a fundamental distinction between the system for levies and that for refunds. As regards the refund system, Articles 19 and 20 of Regulation No 19/62, in the same way as Articles 14 and 15 of Regulation No 141/64, entrusted the Member States themselves with the task of deciding the procedure to be followed in granting refunds. They were merely required to abide by the maximum limits fixed by Community provisions, as laid down in Regulations Nos 141/64 and 164/64, and were accordingly free to make use of their ability to reclaim refunds as they thought fit. The plaintiff emphasizes that the refund system is solely aimed at the organization and direction of the market. It is for this reason that refunds granted in error must, in each case as it arises, be recalled and repaid to the extent necessary, in the context of the organization of the market, to reestablish the balance disturbed by the excessive amount of the refund originally claimed. The difference theory is based on these considerations. Even in cases of dishonesty, there is no reason to depart from these principles. Accordingly, the Court could reply to the question as follows:

‘The question whether and to what extent the repayment of a refund wrongfully claimed under Regulation No 19/62 should be required is a matter for the internal law of the Member States and is left to the discretion of their national courts. The Member States and national courts must however ensure that the maximum limits fixed in respect of refunds by Regulations Nos 55 and 141/64 and by the other provisions adopted for the implementation of the latter by the Community institutions are not exceeded, and that the repayable portion of the refund wrongfully claimed is estimated so as to reestablish a balance within the organization of the market.’

2. The Commission outlines the refund system for exports of agricultural products to third countries, as laid down by Regulation No 19/62 and elaborated by Regulations Nos 92/62, 131/62 and, subsequently, by Regulations Nos 162/64 and 164/64. These Regulations only laid down maximum figures for the relevant refunds and left the Member States free to arrange the details; thus there was nothing to prevent the application of a system allowing the grant of the requisite refund to any product in fact exported. The objective of the refund system as elaborated at the time in Community law does not prohibit the grant of a refund at the rate applicable to goods of a lower quality. As long as refunds were available for goods ‘of lower quality’, the objective of the equalization of prices would also have been attained in a case such as this. The same argument is valid as regards the objective of putting surpluses onto the world market. The Commission recognizes the danger of abuse of the refund system, but notes that it is for the national legislature to adopt the necessary preventive measures. Community law on refunds during the transitional period provides no answer to this problem. Accordingly, the Commission proposes the following reply: Firma Mathes & Schurr and the Commission submitted their oral observations at the hearing on 7 November 1973. The Advocate-General presented his opinion at the hearing on 28 November 1973.

‘The provisions of Community law, especially Article 20 of Regulation No 19 of the Council, do not prohibit the grant of refunds for exports of a specific good to third countries during the period October 1963 to March 1965, even where, for the purposes of obtaining a higher refund, the exporter recorded in the documents relating to the refund a product other than that which was in fact exported. In such a case the Member States were free to make the grant of a refund dependent on further conditions; in particular they could make it a condition for the grant of a refund that the product recorded in the documents relating to the refund should coincide with the product in fact exported.’

Grounds of judgment

1. By order of 7 May 1973, registered at the Court on 15 June 1973, the Hessisches Finanzgericht, pursuant to Article 177 of the EEC Treaty, referred to the Court the question whether Article 20 (2) of Regulation No 19/62 of the Council of 4 April 1962 (OJ p. 933/62) lays down as a condition for the grant of export refunds that the exported goods and their final destination must correspond with the statements contained in the documents drawn up for this purpose, and whether this provision, in cases where the goods in fact exported are of lesser value than those stated in the said documents, does not allow the grant of the refund corresponding to the quality of those goods.

2. Article 20 of Regulation No 19/62, read in conjunction with the legislation adopted for its implementation, especially Regulations Nos 55/62 EEC of the Council (OJ p. 1583/62) and 141/64 EEC of the Council (OJ p. 2666/64), left to the discretion of the Member States the question whether or not to grant refunds for the export of agricultural products to third countries. However, in fixing the conditions for the grant of these refunds and their amounts, the Member States were required to adhere to the maximum limits laid down by the Community and the rules necessary for the application of the general system provided for by Regulation No 19/62. On the other hand, it was open to them to adopt criteria more restrictive than those provided for by the Community rules.

3. Accordingly, in the context of the optional export refunds, the Member States were required to take account only of those products which at the least fulfilled the conditions set out in the Explanatory Notes to the Brussels Nomenclature. Accordingly, in the event of the goods exported not corresponding to the statements contained in the export documents, on the basis of which the refund was granted, the Member State was obliged at the very least to reduce the refund so that it did not exceed the limit laid down for the product exported. Subject to this obligation, it was for the authorities of the Member States to decide according to their national law the further consequences of such an occurrence.

4. It must therefore be concluded that, in cases where the goods in fact exported did not correspond to the information given in the export documents, (a) Article 20 (2) of Regulation No 19/62 required the national authorities to reduce the refund granted so that it should not exceed the maximum limits laid down for the goods in fact exported and, (b) subject to this obligation, it was for those authorities to decide according to their national law on the necessary further consequences.

Costs

5. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable, and as these proceedings are, insofar as the parties to the main action are concerned, a step in the action pending before a national court, the decision on costs is a matter for that court.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of the plaintiff in the main action and of the Commission; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Article 177; Having regard to Regulation (EEC) No 19/62 of the Council of 4 April 1962, especially Article 20; Having regard to the Protocol on the Statute of the Court of Justice of the EEC, especially Article 20; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; THE COURT in answer to the question referred to it by the Hessisches Finanzgericht, in accordance with the order of that court dated 7 May 1973, hereby rules: In cases where the goods in fact exported did not correspond to the information given in the export documents:

(a) Article 20 (2) of Regulation No 19/62 required the national authorities to reduce the refund granted so that it should not exceed the maximum limits laid down for the goods in fact exported and,

(b) subject to this obligation, it was for those authorities to decide, according to their national law, upon the necessary further consequences.