JUDGMENT OF 25. 5. 1977 — CASE 105/76 INTERZUCCHERI v REZZANO E CAVASSA

In Case 105/76 Reference to the Court under Article 177 of the EEC Treaty by the Pretura di Recco for a preliminary ruling in the action pending before that court between

THE COURT composed of: H. Kutscher, President, A. M. Donner and P. Pescatore Presidents of Chambers, J. Mertens de Wilmars, M. Sørensen, Lord Mackenzie Stuart, A. O'Keeffe, G. Bosco and A. Touffait, Judges, Advocate General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

The facts, the procedure and the written observations submitted pursuant to 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

A —. On 18 December 1967 the Council adopted Regulation No 1009/67/EEC on the common organization of the market in sugar, which came into force on 1 July 1968; the regulation applied inter alia to white and raw beet sugar and cane sugar and also to sugar beet and sugar cane. Under Article 34 the Italian Republic is, up to and including the 1974/75 marketing year, authorized to grant ‘adaptation subsidies to its beet growers and to its beet processing industry’ — that is to say, the sugar industry. The subsidy may not exceed a specified sum per metric ton of beet or per hundred kilogrammes of white sugar; it may only be granted in respect of a quantity which is within the basic quota. With reference to this, the fourteenth recital in the preamble to the said regulation states that ‘beet and sugar production in Italy is rendered difficult by climatic conditions and, in the case of beet production, by the additional problems presented by the application of modern production methods’ and that ‘provision should be made for granting temporary subsidies to both these activities’. Under Article 38 of Regulation (EEC) No 3330/74 of the Council of 19 December 1974, which repeals Regulation No 1009/67/EEC, the Italian Republic is authorized to grant, during the 1975/1976 to 1979/1980 marketing years, adaptation aids which may not exceed a total of 5·9 units of account per metric ton of beet with a 16 % sugar content processed into sugar. This maximum of 5·9 u.a. was, for the 1976/1977 marketing year, raised to 9·9 u.a. a portion of which might be granted to the processing industry (Regulation (EEC) No 1487/76 of the Council of 22 June 1976, OJ L 167, p. 9). Order No 1195, adopted on 22 June 1968 by the Comitato Interministeriale dei Prezzi (Interdepartmental Committee on Prices, hereinafter referred to as ‘the CIP’) (Gazzetta Ufficiale No 162 of 27. 6. 1968, p. 4057) established on the Italian market the Cassa Conguaglio Zucchero (Sugar Equalization Fund) financed in particular by a sovrapprezzo (surcharge) on every quantity and type of white sugar, whether home produced or imported. Paragraph 6 of the operative part of this measure provided that the income of the Fund must be used to pay for: the subsidy to beet growers and the beet processing industry ‘pursuant to Article 34 of Regulation No 1009/67’; the subsidy to the processing industry in the form of the refund of tax paid on the proceeds of the purchase and transport of beet; the subsidy in respect of the storage costs of the surplus from the 1967/68 harvest and ‘in respect of losses in exporting it [surplus white sugar produced during the 1967/68 sugar year] … which has to be exported before 1 July 1969 (Regulation No 457/68 of 11 April 1968)’; the subsidy to sugar undertakings in order to offset payments made by the latter to beet growers in accordance with an earlier national measure; aid towards a financial reorganization in respect of the cost of transactions carried out in the past by the Equalization Fund in respect of the price of imported sugar; a subsidy to exporters equivalent to the amount of the surcharge referred to above; interest on debit balances for subsidy payments related to surplus output; payment of the management expenses of the Fund. The surcharge was fixed at 56 lire per kilogramme for the marketing year 1975/1976 (CIP Order No 14/1975 of 1 July 1975) and increased to 70 lire per kilogramme for the 1976/1977 marketing year (CIP Order No 20/1976 of 1 July 1976). During the 1975/1976 marketing year provision was made for the following subsidies: (a) a subsidy for home-produced beet amounting to 5056.30 lire per metric ton (CIP Order No 18/1975 of 11 August 1975, paragraph 3); (b) an additional subsidy for home-produced beet amounting to 3165.11 lire per metric ton (above-mentioned CIP Order, paragraph 4); (c) a subsidy for home-produced sugar amounting to 2156.30 lire per 100 kilogrammes (CIP Order No 19/1975 of 11 August 1975, paragraph 5 d).

B —. The company Interzuccheri S.p.A. sold 10000 kilogrammes of sugar to the Ditta Rezzano e Cavassa for a sum of 5100000 lire including the surcharge of 70 lire per kilogramme. At the time of payment the purchaser refused to pay the amount corresponding to the above-mentioned surcharge, that is to say, 721000 lire, claiming that the surcharge was contrary to Community provisions. The applicant company thereupon brought proceedings before the Pretore di Recco with a view to obtaining an order that the defendant should pay the sum in question. In defence Ditta Rezzano e Cavassa contested the application of the applicant and contended that the question of the legality under Community law of the surcharge had already been referred to the Court of Justice of the European Communities by the Pretore di Abbiategrasso. On 21 October 1976 the Associazione Nazionale tra gli Industriali dello Zucchero, del Lievito e dell'Alcool (hereinafter referred to as ‘Assozucchero’ applied to intervene in the case claiming that the applicant's case was well founded and that the objections raised by the defendant company should be dismissed. By order of 21 October 1976, the Pretore di Recco allowed the intervention of Assozucchero and decided to stay the proceedings and to refer to the Court of Justice of the European Communities under Article 177 of the EEC Treaty for a preliminary ruling on the following questions: 1. Must Article 13 (2) of the Treaty of Rome, Article 21 (2) of Regulation (EEC) No 3330/74 (on the common organization of the market in sugar) and Article 20 (2) of Regulation No 1009/67/EEC (replaced by the former) be interpreted as prohibiting, in trade between the Member States in the products mentioned in the said Community regulations, the imposition of a pecuniary charge having the characteristics of the ‘surcharge’ on sugar, as established and regulated by the CIP Order No 1195 of 22 June 1968 and subsequent amendments (CIP Orders No 1222 of 20 June 1969, No 9 of 30 June 1970, No 15 of 30 June 1971, No 7 of 3 August 1972, No 9 of 26 June 1973, No 27 of 28 June 1974, No 19 of 7 August 1975, No 20 of 1 July 1976 and No 24 of 1 October 1976): (a) which is applied by a decision of the national authority to any quantity of sugar, whether home produced or imported; (b) the revenue from which is assigned in part to producers of beet established in the territory of the State which imposes the charge, in part to the sugar industry also established in the territory of that State and in part to cover various charges (including the management expenses of the Cassa Conguaglio Zucchero)? 2. If the reply to Question 1 is in the affirmative, does the prohibition against imposing the above-mentioned pecuniary charge take effect from the entry into force of Regulation No 1009/67/EEC, or from some other date? 3. From the date when the prohibition entered into force, have individual traders who have imported sugar (or the products referred to in the said EEC Regulations) from other member countries of the Common Market an individual right not to pay the pecuniary charge referred to in Question 1 and, in consequence, the right to claim reimbursement where payment has been made? 4. In any case, in view of the fact that since 1968 sugar has been subject to the Community agricultural rules (Regulation No 1009/67/EEC and now Regulation (EEC) No 3330/74), does the imposition of a pecuniary charge having the characteristics described above in Question 1 constitute an infringement of the second subparagraph of Article 40 (3) of the Treaty, according to which the common organization of the agricultural markets ‘shall exclude any discrimination between producers or consumers within the Community’? The order making the reference was lodged at the Court Registry on 28 October 1976. Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by the plaintiff in the main action, represented by Giuseppe Marchesini, Advocate at the Corte di Cassazione of the Italian Republic; by the intervener in the main action, represented by Antonio Sorrentino, Advocate, of Rome, and Mauro De Andre, Advocate, of Genoa; by the Government of the Italian Republic, represented by its Ambassador, Adolfo Maresca, acting as Agent, assisted by Ivo Maria Braguglia, Deputy State Advocate-General; and by the Commission of the European Communities, represented by its Legal Adviser, Cesare Maestripieri, acting as Agent. After hearing the report of the Judge-Rapporteur and the views of the Advocate-General, the Court decided to open the oral procedure without any preparatory inquiry.

II — Summary of written observations submitted to the Court

The plaintiff in the main action cites three judgments of the Court which are relevant to consideration of the first question referred to the Court for a preliminary ruling: the Judgment of 25 June 1970 in Case 47/69, France v Commission ([1970] ECR 487), the Judgment of 19 June 1973 in Case 77/72, Capolongo v Maya ([1973] ECR 611) and the Judgment of 18 June 1975 in Case 94/74, IGAV v ENCC ([1975] ECR 699). In the first of these judgments the Court established a link between the aid and the system adopted for its financing; the second is concerned with the case in which the proceeds of a duty imposed both on the domestic product and on the imported product are intended to finance specific advantages for domestic production only, which would constitute a charge having an effect equivalent to a customs duty; the third judgment reaffirmed the strict conditions under which an internal levy is to be considered as a charge having an effect equivalent to a customs duty.

In particular, the judgment in Capolongo imposed two essential conditions:

a) the charge is used exclusively for the financing of aids, which

b) represent a specific advantage for the domestic product.

The first condition is satisfied if the whole of the proceeds are intended to finance the system of aids at issue and there is no question of any other use; the second is fulfilled only if the advantage secured for the domestic product makes good in its entirety the charge paid by the latter. In any event, the aid must be applied to the same national product as that which it is charged upon and must not be for the general benefit of the economic sector to which it belongs.

As regards the surcharge, it is easy to determine that the proceeds therefrom are not intended exclusively to finance the aid to the processing industry (see Article 6 of CIP Order No 1195/68, listing the uses to which the payments are to be put). Among the uses to which the surcharge was put, a major proportion arises from the total of supplementary payments made to beet producers. When it is borne in mind that during the 1975/1976 sugar year the total proceeds of the surcharge were mainly devoted to domestic beet production, this must automatically eliminate any possibility of those proceeds having been ‘exclusively’ used to finance the supplementary payments benefiting processing undertakings. Beet is a different product from sugar, which is independently classified for customs purposes, and interventions for the benefit of the first product have no effect on the price of sugar.

The price of beet is not only controlled by the Community but is, in Italy, authoritatively fixed by the CIP and supplemented by the subsidies authorized by the Council. The processing industry does not, therefore, derive any advantage, even indirectly, from intervention for the benefit of beet producers.

Finally, the first condition laid down by the decisions of the Court are not fulfilled in the present case because:

a) the proceeds of the surcharge are assigned to purposes and beneficiaries other than the processing industries;

b) the beet-growing industry has, in particular, received the greater part and sometimes even the entire proceeds of the surcharge;

c) beet is a different product from sugar and, in the particular circumstances of the Italian market, aid to beet producers has no effect on the price of sugar;

d) the aid to beet producers can on no account be regarded as an aid to the domestic product on which the charge is levied, both because beet is not the same as sugar and because it is not a domestic product subject to the charge.

Neither is the second condition fulfilled, since the subsidies paid to the processing industry fall far short of making good the effect of the surcharge paid on domestic sugar. More specifically, as regards the 1975/1976 marketing year, the surcharge applied to domestic production (of sugar) is estimated at approximately 75 milliard lire, whereas the aids for domestic production amount to 28 milliard lire.

It is clear from the opinion of the Advocate-General in the IGAV cast that

it is tantamount to a charge having an effect substantially equivalent to a customs duty on imports only in cases where it is made good in full.

The plaintiff in the main action considers that the figures relating to its sugar import business support the contention that the system at issue does not conflict with Community rules on the free movement of goods. From the economic viewpoint, it would be impossible to explain the volume of imports effected if the alleged restrictions really existed. Since Questions 2 and 3 depend on an affirmative answer to the first question they no longer arise.

Fourth question

The answer to this question must be in the negative for three reasons:

a) because the Italian sugar production is characterized by far-reaching structural and natural disparities as compared with that of the other Member States, the Community legislature has authorized aids to domestic production as an exception to the general provisions of Articles 92 et seq. In so doing it has clearly accepted and allowed for all the consequences arising from the aid;

b) the method chosen has the indirect purpose of making good the unequal conditions to which Italian production is subject;

c) the provision in Article 40 or the EEC Treaty is exclusively concerned with measures adopted by the Community institutions and by the Member States under the common organization of the markets.

Finally, the plaintiff in the main action suggests that the questions referred to the Court for a preliminary ruling should be answered as follows:

1) Article 13 (2) of the EEC Treaty cannot be interpreted as making subject to the prohibition of charges having an effect equivalent to a customs duty a pecuniary levy having the characteristics of the surcharge on domestic and imported sugar as governed by Order No 1195 of 22 June 1968 of the CIP of the Italian Republic and by subsequent measures.

2) The second subparagraph of Article 40 (3) of the EEC Treaty cannot be interpreted as prohibiting a Member State from applying a pecuniary levy having the characteristics of the aforesaid surcharge. After referring to the Community provisions regarding adaptation aids and the relevant CIP orders, the intervener in the main action submits figures relating to the proceeds of the surcharge and to payments out of the Sugar Equalization Fund.

First question

Consideration of the origin and purpose of the surcharge should suffice to remove the doubts raised concerning its compatibility with Article 13 (2) of the EEC Treaty. The intervener adds that in its judgment in Capolongo, referred to above, the Court emphasized that the extension of the concept of ‘charges having an effect equivalent to a customs duty’ to an internal levy imposed both on domestic products and imported products implies a substantial stretching of the law. But this possibility is out of the question in the present case. The intention which the Italian Government followed in introducing the surcharge on sugar was to finance, in a way which, from the economic and fiscal point of view, it considered to be the most suitable, the adaptation aids expressly authorized by the basic regulation. Faced with the choice between a general charge to be borne by the population as a whole and a duty imposed on the consumers of the particular product, the Government consciously chose the second method. This choice of fiscal policy, which certainly does not fall outside the province reserved to the authority of the State, seems wholly justified: in the first place on grounds relating to the speed of collection and handling of the surcharge but, above all, because of the fact that, as a general charge would hardly have been tolerable in the particular economic and financial situation of the country, the tax on sugar consumption presented no such difficulty both because the sugar consumers (before the introduction of the common organization) already paid for increases in the cost of domestic production and because, among widely consumed products, sugar was the one which, during the post-war period of inflation, had borne by far the smallest increases.

Once the measure had been adopted, the tax on sugar could only be applied on all sugar consumed in Italy whatever its origin; to impose the charge on the domestic product alone would have amounted to fixing a higher price for the domestic product than that for the imported product, with all the ridiculous results which would ensue.

If the Italian authority were compelled to revoke the surcharge on sugar it would, in order to finance the adaptation aids, which continue to be essential, be compelled to go elsewhere for the necessary funds amounting to more than a hundred milliard lire per year — which would be impossible in the present condition of the State's finances. In any case, the existence of the surcharge had no restrictive effect whatever on imports into Italy of sugar coming from the other Member States.

On the contrary those imports have increased enormously, inasmuch as they more than make up for the whole of the amount by which production falls short of national consumption.

An examination of the case-law of the Court confirms that the surcharge does not come within even an extended concept of ‘charge having equivalent effect’.

The intervener in the main action refers to the judgment in the Capolongo case, mentioned earlier, in which the Court ruled that ‘a duty falling within a general system of internal taxation applying systematically to domestic and imported products according to the same criteria can nevertheless constitute a charge having an effect equivalent to a customs duty on imports when such duty is intended exclusively to support activities which specifically benefit the taxed domestic product’.

This principle was reaffirmed in the judgment in IGAV which emphasized that a definition in the sense indicated requires a clearly established connexion between, on the one hand, the collection of a fiscal charge levied without distinction on all the products in question and, on the other hand, the use of the proceeds from it for the exclusive benefit of the domestic products.

In the case of the surcharge the domestic product subject to the charge (sugar) is not the same as the domestic product benefiting from the aid (either sugar or, to a greater extent, beet). Moreover the proceeds from the levy are not exclusively assigned to sugar producers but also and to a greater extent to beet producers.

Obviously, therefore, the conditions of exclusive use and specific benefit are not fulfilled.

Once it has been shown that the surcharge on sugar cannot be described as a charge having an effect equivalent to a customs duty, Questions 2 and 3 no longer arise.

Fourth question

In the present case Article 40 (3) of the EEC Treaty does not call for consideration: in the first place, because the principle of non-discrimination therein is concerned with measures put into effect under the common organization of the markets and, secondly, because the surcharge, which was introduced in order to finance the authorized adaptation aids, does not pursue substantially different objectives or perform a different function from those appropriate to those aids, the very purpose of which is to reduce the recognized basic disparity between Italian producers an producers in the other Member States.

The Government of the Italian Republic considers that the origin, structure and working of the ordinary surcharge enable the first question submitted for a preliminary ruling to be answered wholly in the negative. The surcharge is a fiscal measure imposed by the State in order to offset increases in the cost of production of home-produced sugar to meet industrial and structural difficulties recognized by the Community and within the limits authorized by it. It affects home-produced sugar and imported sugar in the same way, to the same extent and under the same conditions; it is to be paid by the consumer and forms an integral part of the price. As regards imported sugar, the surcharge is imposed because this sugar is consumed in Italy and not because or as a result of crossing the frontier and this makes it impossible to describe the ordinary surcharge as a charge having an effect equivalent to a customs duty.

Since the surcharge consists of an internal levy imposed both on the domestic and the imported product, it cannot be regarded from the point of view of the principle of non-discrimination provided for in Article 95 of the EEC Treaty.

For the decisions in Capolongo and IGAV to be applicable to a charge of this kind it must be possible to establish that the proceeds of the charge on the imported product finance the national product which (a) is not subject to any charge and (b) benefits from an unauthorized subsidy. These two features are not present in the case of the ordinary surcharge on imported sugar. In the first place, the proceeds of the surcharge on imported sugar are in themselves insufficient to finance the subsidies to beet producers and to the processing industry. This is, therefore, far from being a case where, in effect, the charge is applied exclusively on the imported product. On the contrary, it is also applied, and to a greater extent, to home-produced sugar because the consumption of the domestic product is much greater than that of the imported product. In connexion with this second point it must be borne in mind that the subsidies in question are lawful and authorized by the Community.

The Italian Government adds the following points. Article 6 of CIP Order No 1195 shows that when the surcharge on sugar was introduced the proceeds from it were also devoted to purposes other than the financing of aids authorized by the Community. Some of these purposes were temporary requirements consequent upon the introduction of the common organization of the markets. Today, it is not possible to take account of those requirements, to treat the aids as unauthorized and to conclude therefrom that the surcharge is illegal.

Even if the basic purpose of the surcharge is to finance authorized aids the possibility of their being put to a different use could, in appropriate cases, occur again. If, in consequence, the decisions in Capolongo and IGAV were considered to be applicable, this would not alter the fact that the conditions of exclusive use and specific advantage are absent in the present case.

Finally, to whatever use the proceeds of the surcharge are put, it constitutes a fiscal measure, an internal levy and not a measure intended to regulate and control the domestic market in sugar. It cannot therefore be contended that the Community is competent to impose the surcharge. The Community did no more than authorize Italy to grant adaptation aids but it did not adopt any provisions laying down detailed rules for payment of the aids and the system of financing.

The reply given to the first question submitted for a preliminary ruling means that Questions 2 and 3 no longer arise.

Nevertheless on the question of the right to reimbursement of sums paid in respect of charges subsequently held to have an effect equivalent to a customs duty, the Italian Government refers to the written observations which it submitted in Case 33/76, RE WE v Landwirtschaftskammer (Judgment of the Court of 16 December 1976 [1976] ECR 1989).

Fourth question

Apart from the fact that reference to Article 40 is irrelevant (see the observations in Case 77/76) it must be pointed out that the existence of discrimination can be presumed only where the same situations are treated differently. But even the Community institutions have recognized the difference in the natural and structural conditions which characterize Italian sugar production and the object of the surcharge is essentially to reduce the disparity which exists between Italian producers and producers in the other Member States. Disparity would undoubtedly exist if Italian producers and producers in other Member States were subject to the same conditions.

Nor can there be any inequality of treatment between national producers and consumers in view of the fact that the surcharge is intended to offset increases in cost which the former have necessarily to bear on account of recognized industrial and structural difficulties.

Furthermore, the Community has recognized the need to protect Italian sugar production. If (because there was no surcharge) the imported product were available on the Italian market at a lower price it would be impossible to satisfy the need for protection, with the result that there would be discrimination against the domestic product and its potential consumers.

The Commission also refers to the decisions of the Court in Cases 77/72 and 94/74, cited above.

It is clear from the latter of these judgments that the definition of a charge which prima facie appears to be an internal charge as a charge having an effect equivalent to a customs duty requires a clearly established connexion between, on the one hand, the collection of a fiscal duty levied without distinction on the products in question and, on the other hand, the advantage enures for the exclusive benefit of the domestic product by the proceeds of that duty. In the present case the conditions laid down by the Court are not fulfilled because:

The domestic product taxed is not the same as the domestic product receiving the advantage;

Revenue from the charge is not used for the exclusive benefit of the sugar industry.

On the first point it is sufficient to recall that the taxed product is sugar (heading 17·01 of the Common Customs Tariff) whereas the products benefiting from the aids are sugar and sugar-beet (heading 12.04).

Moreover, the proceeds of the charge are not used exclusively for the benefit of sugar undertakings; once the operating costs of the Fund have been met, the funds accumulated by it are handed over to beet producers and sugar producers.

The objection can certainly be raised that the aid for beet has of necessity an effect on the price of sugar but if the principle that the products must be identified with each other is abandoned this will open the door to endless argument. A comparison between the levy imposed on the domestic product and the aid which it receives requires, in each case, an appraisal of the advantages enjoyed by all the products concerned in the manufacture of the product in question. Before these advantages can be assessed, account must also be taken of any levies which may be imposed on these products. In the Commission's view this is not an occasion for doing violence to concepts of law and, since the two provisions are directly applicable, creating uncertainty about the limits within which Articles 13 and 95 of the EEC Treaty apply. With regard to the clarity of these concepts, the Commission refers to the comments made by the Advocate-General in his opinion in the IGAV case.

The decisions referred to above cannot apply where the ‘use’ to which the levy is put is not exclusive and where the charges imposed on the domestic product are only offset in part with the result that, because of the levy in question, the imported product is subject to a charge greater than that applied to the domestic product, which conflicts with the provisions of Article 95 of the Treaty.

So far as the present case is concerned, according to a rough estimate for the 1975/1976 marketing year, the levy of 75 milliard lire on domestic production was in part offset by subsidies amounting to 28 milliard paid to the sugar manufacturers.

Second, third and fourth questions

In view of the above considerations these questions no longer arise. Nevertheless the Commission submits the following observations

The reference to Article 40 (3) is irrelevant since the principle of non-discrimination applies to measures adopted as part of the common organization of the markets by the Community or by a Member State. Measures taken by the Member States outside the common organization must be appraised on the basis of the specific rules in the Treaty, which likewise prohibit discrimination.

The Commission submits that the question should be answered as follows:

A levy which forms part of a general system of internal taxation applied, subject to identical criteria, equally to domestic and imported products may constitute a charge having an effect equivalent to a customs duty on imports if it is used for the sole purpose of financing activities for the specific benefit of the taxed domestic product, if the taxed product is the same as the domestic product which it benefits, and if the charges imposed on the domestic product are offset in full.

III — Oral procedure

The plaintiff and the intervener in the main action, the Government of the Italian Republic and the Commission of the European Communities submitted oral observations at the hearing on 22 March 1977.

The Advocate-General delivered his opinion at the hearing on 3 May 1977.

Decision

1. By order of 21 October 1976, received at the Court Registry on 28 October 1976, the Pretura di Recco referred to the Court four questions concerning the interpretation of Article 13 (2) of the Treaty and of Council Regulations No 1009/67/EEC of 18 December 1967 and No 3330/74 of 19 December 1974 on the common organization of the market in sugar (OJ, English Special Edition 1967, p. 304, and OJ L 359 of 31. 12. 1974, p. 1). These two questions are submitted in connexion with proceedings between two Italian undertakings.

2. Interzuccheri, the plaintiff in the main action, sold 10000 kilogrammes of sugar to Ditta Rezzano e Cavassa, the defendant in the main action, and the latter refused to pay the part of the purchase price representing the charge called the surcharge (sovrapprezzo), paid on the goods by the plaintiff in the main action, on the ground that this tax was incompatible with Community provisions. Interzuccheri thereupon applied to the Pretore for an order that the defendant should pay the sum in question. On 21 October 1976 the Associazione Nazionale tra gli Industriali dello Zuccheri, del Lievito e dell'Alcool (‘Assozucchero’) applied to intervene in the case in support of the plaintiff and claimed that the objections raised by the defendant should be dismissed.

3. By the order cited above the national court allowed the intervention, found that the question of Community law raised by the parties was the same as that which the Pretore di Abbiategrasso had referred to the Court of Justice for a preliminary ruling in Case 77/76, Cucchi v Avez, and decided to refer to the Court four questions designed to establish the compatibility or otherwise with Community law of the contested surcharge (sovrapprezzo).

I — General observations

4. It is clear from the order referring the matter to the Court that the answer to the questions submitted is to enable the national court to determine the compatibility or otherwise with Community law of the charge called the surcharge (sovrapprezzo) introduced by a measure of the CIP, the proceeds of which are intended to finance adaptation aids to the Italian beet producers and sugar-processing industry. In its observations, the Government of the Italian Republic contends that the grant of these aids was expressly authorized by Article 38 of Regulation (EEC) No 3330/74 for the 1975/1976 to 1979/1980 sugar-marketing years. It considers that this authorization empowers it to find the funds necessary for financing by means which appear to it to be the fairest and most appropriate within the limits of Community law.

5. Authorization under Article 38 of Regulation (EEC) No 3330/74 to grant the aids provided for therein cannot be taken to mean that any method of financing these aids, whatever its character or conditions, is compatible with Community law. In the financing of the aid granted, the national authorities are in particular subject not only to the obligations arising under the Treaty but also to those arising under the other provisions of Regulation (EEC) No 3330/74. A method of financing which provides for derogation from the other provisions must arise from an express provision or, at least, a form of words which make clear the Council's intentions in this respect. There are no words enabling such derogation to be made and this must be borne in mind in answering the questions submitted.

II — The questions relating to the surcharge

6. The first question is whether Article 13 (2) of the Treaty and Article 21 (2) of Regulation (EEC) No 3330/74 and Article 20 (2) of Regulation No 1009/67/EEC prevent the application, in trade between the Member States on the market in sugar, of a national measure imposing a charge on any quantity of sugar, whether home produced or imported, the proceeds of which are used for the exclusive benefit of national sugar refineries and beet producers.

7. Article 9 of the Treaty, which at the material time was the same as the Article 13 referred to in the question, prohibits the imposition of customs duties on imports of all charges having equivalent effect in trade between Member States. Likewise Article 20 (2) of Regulation No 1009/67/EEC and Article 21 (2) of Regulation (EEC) No 3330/74 prohibit, save as otherwise provided in those regulations or by derogation determined by the Council, the levying of any customs duty or charge having equivalent effect.

8. As was ruled in the judgments of 19 June 1973 (Case 77/72, Capolongo [1973] ECR 611) and of 18 June 1975 (Case 94/74, IGAV [1975] ECR 699), the prohibitions contained in Articles 9 and 13 are aimed at any tax demanded at the time or by reason of importation and which, being imposed specifically on imported products to the exclusion of the similar domestic product, results in the same restrictive consequences on the free movement of goods as a customs duty by altering the cost price of that product. On the other hand, the fact that a charge is applied without distinction to domestic products as well as to products from other Member States gives rise to the question whether the taxation at issue falls within the prohibition in Articles 9 and 13 or the rule against discrimination in matters of internal taxation laid down by Article 95.

9. One and the same scheme of taxation cannot, under the system of the Treaty, belong simultaneously to both the categories mentioned, having regard to the fact that the charges referred to in Articles 9 and 13 must simply be abolished whilst, for the purpose of applying internal taxation, Article 95 provides solely for the elimination of any form of discrimination, direct or indirect, in the treatment of the domestic products of a Member State and of products originating in other Member States. Financial charges within a general system of internal taxation applying systematically to domestic and imported products according to the same criteria are not to be considered as charges having equivalent effect.

10. The situation would be different only if such a duty, which is limited to particular products, had the sole purpose of financing activities for the specific advantage of the taxed domestic products so as to make good, wholly or in part, the fiscal charge imposed upon them. Such a fiscal device would in fact only appear to be a system of internal taxation and accordingly could by reason of its protective character be termed a charge having an effect equivalent to customs duties so as to bring Articles 9 and 13 and the provisions of the regulations quoted into operation. Such a definition would nevertheless imply a clearly established connexion between, on the one hand, the collection of a fiscal duty levied without distinction on the products in question, whether domestic or imported, and, on the other hand, the advantage which enures only for the benefit of the domestic products by reason of the proceeds of that same duty.

11. It is therefore for the national court to establish the existence or otherwise of this connexion and to take into account, in the circumstances, the fact that, according to the information on the file, it appears that the revenue produced by the imposition of the contested charge benefits beet-producers as well as the processing industry in such a way that sugar, as a product distinct from beet, only receives less than half of the funds collected.

12. It follows from the foregoing that the answer to the first question must be that a duty falling within a general system of internal taxation applying to domestic products as well as to imported products according to the same criteria can constitute a charge having an effect equivalent to a customs duty on imports only if it has the sole purpose of financing activities for the specific advantage of the taxed domestic product; if the taxed product and the domestic product benefiting from it are the same; and if the charges imposed on the domestic product are made good in full.

13. In these circumstances the second and third questions, which depend on an affirmative answer to the first, no longer arise.

14. The fourth question is whether the application of a pecuniary charge such as that referred to in the first question constitutes an infringement of the prohibition of discrimination between producers or consumers laid down in the second subparagraph of Article 40 (3) of the Treaty. In this connexion it is sufficient to note that the prohibition of any discrimination between the products of other Member States and similar domestic products, laid down in Article 95 of the Treaty, enables any infringement of fundamental Community principles in the matter referred to by the national court to be more specifically identified. In consequence there is no need to answer this question either.

Costs

15. The costs incurred by the Government of the Italian Republic and by the Commission of the European Communities, both of which submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the national court, the decision as to costs is a matter for that court.

On those grounds, THE COURT in answer to the questions referred to it by the Pretura di Recco by order of 21 October 1976 hereby rules: