JUDGMENT OF 5. 2. 1976 — CASE 94/75 SÜDDEUTSCHE ZUCKER v HAUPTZOLLAMT MANNHEIM

In Case 94/75, reference to the Court under Article 177 of the EEC Treaty by the Finanzgericht Baden-Württemberg for a preliminary ruling in the action pending before that court between

THE COURT composed of: R. Lecourt, President, H. Kutscher, President of Chamber, A. M. Donner, J. Mertens de Wilmars, M. Sørensen, Lord Mackenzie Stuart and A. O'Keeffe, Judges Advocate-General: J.-P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts

The facts of the case, the procedure and the observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts and procedure

Under Regulation No 1009/67/EEC of the Council of 18 December 1967 on the common organization of the market in sugar (OJ No 308 of 1 8. 12. 1967, p. 1; English Special Edition 1967, p. 304) the Hauptzollamt Mannheim issued the undertaking Süddeutsche Zucker-Aktiengesellschaft on 6 November 1974 with a notice of assessment to production levy in the sum of DM 51380.73. The ground put forward in the notice of assessment, as to DM 38538.55 was that a refining loss rate of 0.6 % had to be applied to the deductible item of sugar sweepings in respect of the 1968/69, 1969/70, 1970/71 and 1972/73 sugar marketing years.

The objection lodged against that notice of assessment not having been successful, Süddeutsche Zucker-Aktiengesellschaft brought an action before the Finanzgericht Baden-Württemberg.

In the course of the proceedings in that court the plaintiff claimed that it was not necessary to treat processed sugar sweepings as raw sugar within the meaning of Article 1 (2) of Regulation (EEC) No 142/69 of the Commission and consequently to impose the production levy on the quantity of sugar corresponding to the 0.6 % refining loss in disregard of the fact that this quantity was neither produced nor sold. Sugar sweepings arise from the production of earlier years and consequently cannot be liable to the production levy twice.

The Hauptzollamt, on the other hand, considers that sugar sweepings are sugar mixed with dirt arising from the production of the previous year which must be refined again at the beginning of the following year. It is therefore not the original quantity of sugar sweepings which is to be added to the production of the current sugar year, but only the quantity less the loss due to processing, estimated in a general way at 0.6 %. Consequently only that reduced quantity may be deducted on calculating the production levy.

By order of 22 May 1975, the Finanzgericht Baden-Württemberg (Second Senate) stayed the proceedings and referred the following questions to the Court of Justice of the European Communities in accordance with Article 177 of the EEC Treaty for a preliminary ruling:

1) Does sugar production within the meaning of Regulation (EEC) No 142/69, especially Article 1 (1) thereof, also include the production of white sugar from sugar sweepings on which the production levy has already been imposed in accordance with Article 27 of Regulation No 1009/67/EEC in a previous sugar marketing year?

2) If the first question is answered in the affirmative: Does Article 1 (2) of Regulation (EEC) No 142/69 whereby certain products are excluded when the quantity referred to in paragraph (1) of that article is being calculated also cover sugar sweepings?

3) If the first and second questions are answered in the affirmative: When the quantity which is not to be taken into consideration within the meaning of Article 1 (2) of Regulation (EEC) No 142/69 is being determined, must reference be made to the quantity of sugar sweepings or to the quantity of white sugar which has been produced from the sugar sweepings?

The order of the Finanzgericht was registered at the Court on 3 September 1975.

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were lodged by Süddeutsche Zucker-Aktiengesellschaft, by the Hauptzollamt Mannheim, represented by Mr Atzinger and by the Commission of the European Communities, represented by its Legal Adviser, P. Gilsdorf, acting as Agent.

II — Written observations submitted to the Court

Süddeutsche Zucker-Aktiengesellschaft refers to its arguments set out before the Finanzgericht.

The Hauptzollamt Mannheim considers that the solution of the problem follows from the purpose of the provisions concerning the production levy applicable in the present case.

By the establishment of a production levy on sugar produced outside the basic quota, but within the maximum quota, producers must themselves assume financial responsibility for the disposal of surplus sugar. The only fact which matters for the purpose of the collection of this levy is consequently the ascertainment of the quantity of sugar actually produced.

The total quantity of sugar, for the purpose of assessing the quantity of sugar produced during a sugar year, was determined first on the basis of Article 3 (1) of Regulation (EEC) No 142/69 under which sugar production for the purpose of the levy, means the quantity of sugar ‘actually manufactured’. To the extent to which sugar sweepings produced during a previous year were added to the production process, there were excluded from the calculation, in accordance with Article 1 (2) of Regulation No 142/69, the quantities of white sugar produced from those sugar sweepings.

It is only from the quantity of sugar sweepings, less the dirt and the refining loss caused inevitably by processing, that the amount of white sugar can be calculated and it is therefore that quantity which was subtracted from the quantity produced in a later year.

That method of calculation is in accordance with Regulation No 1009/67/EEC and with Regulation (EEC) No 142/69 since it allows the quantity of sugar actually manufactured to be established.

If, on the other hand, account is not taken of refining losses, the production of sugar during a later year is reduced by a greater quantity than that actually caused by the processing of the sugar sweepings from a previous year. In these circumstances the quantity of sugar actually manufactured is altered with the result that no production levy is charged on a quantity of sugar manufactured during a later year to the extent of the refining loss on the sugar sweepings.

This last method cannot be based either upon Regulation (EEC) No 700/73 of the Commission of 12 March 1973 (OJ L 67 of 14. 3. 1973, p. 12) which replaces the regulation applicable in the present case.

Article 1 (2) (b) of the new regulation provides expressly that the quantity of white sugar produced from sugar sweepings from another sugar year shall be excluded when the quantity of sugar manufactured during a sugar year is being calculated.

Although the quantity of white sugar produced from sugar sweepings is calculated — according to the wording of Article 1 (4) — in proportion only to the sucrose content of the sugar sweepings, this new method of calculation takes no account of the refining loss.

This comprehensive assessment consequent upon the new rules undeniably shows a variation from the more precise procedure adopted in the Federal Republic of Germany until 15 March 1973. The new rules however cannot be understood as meaning that they also exclude, in respect of the past, the application of the more precise method of calculating the quantity of sugar actually manufactured.

The determination of the quantity of sugar produced before the entry into force of the new regulation was made exclusively in accordance with the provisions of Regulation No 1009/ 67/EEC and of Regulation No 142/69.

In the absence of any indication allowing the application of rules of a comprehensive nature such as those introduced later, the said regulations permitted the application of the more precise procedure put into practice in the Federal Republic of Germany.

As to the first two questions, the Commission states that the provisions concerning the calculation of the sugar production of an undertaking and, consequently, of the levy on production, must be regarded only from the point of view of the quota system. This system consists of a series of measures for planning production, for the application of which reference is made to the actual production of the undertaking in question. Once a quantity of sugar produced has already been taken into account in accordance with the quota system and subjected to any levy due, the purpose of the said planning measures for production is fulfilled.

The Commission duly took account of this purpose in Article 1 (2) of Regulation No 142/69 by providing in particular for a series of deductible items for the calculation of sugar produced which was already subject to the quota system as being an unfinished product (Cases (a) to (d)).

The sugar sweepings, recovered by ‘sweeping’ after the operations of transport, packaging, cutting etc., require refining once more if they are to be re-used. If, as is most often the case, the re-refining is carried out during the following sugar year, then from the purely technical point of view, such production must be included in the sugar production of that year within the meaning of Article 1 (1) of Regulation No 142/69.

It is however clear that the basic concept of not taking into account in the calculation of such production the unfinished products referred to in Article 1 (2) is equally valid for sugar sweepings. The problem arising from the fact that sugar sweepings are not mentioned in the said article was simply not noticed at the time when Regulation No 142/69 was drawn up and adopted. It was at the express request of the Federal Republic of Germany that Regulation No 700/73 was adopted in this connexion, the other Member States having considered that it was a nicety which was not absolutely indispensable from a legal point of view. The origin of the regulations as well as the practice followed by the Member States thus confirms the interpretation that the production of white sugar manufactured from sugar sweepings of a previous sugar year should not be included in the total quantity of the sugar produced as mentioned in Article 1 of Regulation No 142/69.

The problem raised in the present case arises only because the sugar sweepings of one particular sugar year were included a priori — as white sugar — in the production of that same sugar year. The Community rules are actually based on the concept which regards production as being a process.

It is necessary in any case to accept that the production of white sugar for a particular sugar year, as finally calculated at the end of the year, also includes the sugar sweepings.

As to the third question, the Commission considers that for the calculation of the quantities produced which are not to be taken into account, it was necessary to take as a basis, within the framework of Regulation No 142/69, the original quantities of sugar sweepings, taking account of their sucrose content expressed as white sugar. The problem of refining loss, a question of small economic importance, was raised only at the time of the drafting of Regulation No 700/73.

In spite of its very small economic importance, it is not a simple question of the administrative application of Community law coming within the jurisdiction of the Member States, but is in fact a question concerning the very scope of the rule at issue. The reply to the question raised must therefore be deduced from the provisions of Community law.

According to the Commission the interpretation of the German administration, equating sugar sweepings to raw sugar within the meaning of Article 1 (2) (b) of Regulation No 142/69 is in the last analysis too restrictive.

In fact, the raw sugar is not deducted to the extent of the original quantity used in production, but instead, to the extent of the quantity of white sugar actually manufactured from this raw sugar. There occurs here also — during the refining process — a certain loss called ‘refining loss’. As the quota system is based on the total quantities of sugar expressed as white sugar, it is logical that this loss should have an effect upon the determination of the quantities deductible; otherwise the manufacturer of white sugar using raw sugar as a basic material would be at an advantage as compared with the manufacturer producing white sugar directly from the raw material.

Nevertheless, these considerations are not valid for sugar sweepings which have already been through a complete refining process and have been subjected as a finished product to the production levy.

A reduction of the deductible quantity corresponding to the loss of 0.6 % due to the further refining implies in effect subjecting the final product to a double imposition of the levy to the extent of this percentage.

Such an unjustifiable result, expressly precluded in the interim by Article 1 (4) of Regulation No 700/73, can be avoided within the framework of the previous rule, so long as account is taken both of the objective of the system of quotas and of that of the rules concerning deductions laid down in Article 1 (2). The objective of these rules was clearly to prevent a double levy on the sugar manufacturer which would follow from too formal a definition of the concept of ‘sugar production’.

If that objective properly allows sugar sweepings to be accepted as a deductible item, it would consequently be logical and in accordance with the system to fill the existing lacuna in such a way as to prevent any supplementary levy, however small.

III — Oral procedure

The Commission of the European Communities presented oral argument at the hearing on 13 January 1976.

The Advocate-General delivered his opinion at the hearing on 27 January 1976.

Law

1. By an order of 22 May 1975, received at the Court Registry on the following 3 September, the Finanzgericht Baden-Württemberg, under Article 177 of the EEC Treaty, referred to the Court three questions on the interpretation of Regulation (EEC) No 142/69 of the Commission of 25 January 1969, laying down certain detailed rules for the application of the quota system for sugar (OJ L 20/1969, p. 1). These questions were raised in proceedings relative to the collection of the production levy provided for in Article 27 or Regulation No 1009/67/EEC of the Council of 18 December 1967 on the common organization of the market in sugar (OJ No 308/1967, p. 1), which subjects the quantity of sugar produced outside the basic quota of the manufacturers in question to such a levy.

2. Under the terms of Article 1 (1) of Regulation No 142/69 ‘sugar production’ for the purposes of Article 27 of Regulation No 1009/67/EEC means the total quantity, expressed as white sugar, of: white sugar, raw sugar, invert sugar and the syrups mentioned therein. Under paragraph (2) of the same article certain quantities are to be excluded when the quantity referred to in paragraph (1) is being calculated, the particular intention being the avoidance of a double levy.

3. The sugar manufacturer, the plaintiff in the main action, disputes the calculation of the levy demanded in so far as it refers to the sugar produced from sugar sweepings, that is to say, from sugar produced previously, but which remains after the operations of packaging and dispatch in the factory, and which is revovered by sweeping, but which must because it is dirty be refined again. According to the applicant, sugar sweepings having already at the time of a previous refining been included as sugar produced within the meaning of Article 1 of Regulation No 142/69, must be deducted from the quantity produced when it is refined for a second time. As the material refined suffers a loss in its sucrose content, known as refining loss, the quantity produced by the second refining of sugar sweepings must further be increased by this percentage loss which therefore has also to be deducted from the sugar production subject to the levy. The Hauptzollamt Mannheim (Mannheim Principal Customs Office), the defendant in the main action, however, disputes this view.

4. The first question asks whether sugar production within the meaning of Regulation No 142/69 also includes white sugar produced from sugar sweepings on which the production levy has already been imposed in the previous sugar marketing year. The second question asks whether in the event of an affirmative answer Article 1 (2) of the regulation, which excludes certain products from the calculation of the production subject to the levy, applies to sugar sweepings. The third question asks whether the calculation of the quantity to be excluded from the production as sugar sweepings must be based upon the quantity of sugar sweepings before the second refining, or on the quantity of white sugar produced from the sugar sweepings after such refining.

5. Although Article 1 (2) of Regulation No 142/69 does not expressly mention sugar sweepings, both logic and equity lead nevertheless to the conclusion that they must be deducted from the production mentioned in paragraph (1) of the article. The objective of the regulation being to fix exactly the quantities produced outside the, quota and which for this reason are subject to the production levy provided for in Article 27 of Regulation No 1009/67/EEC sugar sweepings should be deducted from these quantities which have already been subject to such levy at the time of their first refining. For the same reason account should be taken of the quantity of sugar which at the first refining was regarded as being part of the production, but which because of its origin has not been disposed of on the market. These conclusions are confirmed moreover by the wording of Regulation No 700/73 of the Commission of 12 March 1973 (OJ L 67/1973, p. 12) which replaced Regulation No 142/69 and Article 1 (2) of which lays down that there shall be excluded, when the quantity referred to in paragraph (1) is being calculated, quantities of white sugar produced from sugar sweepings, and whilst Article 1 (4) lays down that sugar sweepings from a previous sugar year shall be expressed as white sugar in proportion to the sucrose content. It is therefore appropriate to reply to the effect that Article 1 of Regulation No 142/69 must be interpreted in this sense.

Costs

6. The costs incurred by the Commission of the European Communities which has submitted its observations to the Court are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the Finanzgericht Baden-Württemberg, the decision on costs is a matter for that court.

On those grounds, THE COURT in answer to the questions referred to it by the Finanzgericht Baden-Württemberg in its order of 22 May 1975 hereby rules: