JUDGMENT OF 5. 5. 1977 —CASE 110/76 PRETORE OF CENTO v A PERSON OR PERSONS UNKNOWN

In Case 110/76 Reference to the Court under Article 177 of the EEC Treaty by the Pretura of Cento 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: J.-P. Warner Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

The order making the reference and the written 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

In October 1976, the Director of the National Centre for Customs Studies of Genoa laid before the judicial authorities an information concerning the smuggling into Italy of goods which had thereby evaded payment of the prescribed customs duties and levies.

The Pretore of Cento then declared criminal proceedings for smuggling open against persons unknown. Since he was required by Italian procedural law to give notice of the commencement of the proceedings to the injured parties, he decided, by order of 15 November 1976, which reached the Court Registry on the following 23 December, to refer the following questions under Article 177 of the EEC Treaty to the Court of Justice for a preliminary ruling:

‘1. Whether, by virtue of the Decision of the Council of the European Communities of 21 April 1970, the injured party, in the case of a smuggling offence, is only the European Economic Community, or whether the EEC may assume the capacity of injured party together with the individual national States to which the levying of customs duties for and on account of the Community has been assigned. 2. Whether, as a result, the national court must, in accordance with its own procedure, notify the Community that criminal proceedings have been instituted in respect of the smuggling offence so as to enable it to apply for recovery of the customs duties payment of which has been evaded.’

The Council Decision of 21 April 1970 allocates inter alia the levies and duties arising under the Common Customs Tariff to the Communities by way of own resources with effect from 1 January 1971.

By virtue of Article 6 (1) of the said decision and of Article 1 of Regulation No 2/71 of the Council, own resources are to be established, collected and made available to the Commission by the Member States in accordance with their own provisions laid down by law, regulation or administrative action, which are to be amended, where necessary, for that purpose.

The combined provisions of Articles 1, 6 (2) and (3), 7 (1) and 13 (2) of Regulation No 2/71 make it clear that the Member States are required not only to establish all own resources, but also to make available to the Communities all own resources so established, including any which may not have been collected, unless collection has been impossible for reasons of force majeure.

Upon 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 under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

The Government of the Italian Republic points out that the solution to the questions referred is clear from the wording of Article 6 (1) of the Council Decision of 21 April 1970.

The solution is also to be found in the judgment of the Court of 4 April 1974 (Joined Cases 178 to 180/73, Mertens [1974] ECR 383) according to which ‘… it continues to be the task of the Member States to undertake prosecutions and proceedings for the purpose of the system of levies and refunds and to continue to take steps to this end vis-à-vis the parties involved’, and ‘It follows from this that the position of the Member States and of their authorities which are parties to the legal proceedings in relation to the reimbursement of Community revenue evaded or of sums improperly paid, has not been affected by the consequences of the attribution to the Community of its own resources.’

That interpretation by the Court is confirmed by the provisions of Regulation No 2/71 of the Council (Articles 1, 6 (1), 7, 13 (2) and (3) and 14 (3) (a)).

Thus it clearly appears from the provisions mentioned above that the Community institutions do not have any power to take proceedings for the collection of unpaid Community revenue. Therefore no direct relationship between the Communities and individuals can arise in that respect. That solution, moreover, is to be found in the aforesaid judgment.

The Commission emphasizes the fact that by virtue of the Council Decision of 21 April 1970 the Communities' own resources belong directly, from the beginning, to the Communities, which have exclusive control over them. Agricultural levies and customs duties, which are entered in the budget of the Communities as specific and determined resources and not as the equivalent of debts of the Member States to be determined on the basis of the latters' revenue, are paid automatically such that the national governments or parliaments are unable to interfere.

Any smuggling offence that may arise, enabling those assessable to agricultural levies and customs duties to evade payment of those charges, constitutes a direct violation of the rights of the Communities, infringing at one and the same time:

the interest of the Communities in ensuring that obligations imposed on individuals by Community law are respected;

the interest of the Communities in the harmonious development of economic activities within their territory, by the establishment of a common market and the progressive approximation of the economic policies of the Member States;

the Communities' entitlement to the revenue corresponding to the own resources, payment of which has been evaded.

However, the Commission points out that since the rules for determining a uniform basis for assessing value added tax are not yet in force in any of the Member States, the budget of the Communities is still balanced at the present time by means of the payment of contributions by the States. The total of those contributions is equal to the difference between expenditure incurred during the financial year and the own resources in fact available. Thus own resources, payment of which has been evaded, are balanced in the Communities' budget by a corresponding increase in the contributions payable by the Member States. Therefore in reality the financial loss caused by tax evasion is borne by all the Member States.

The Member States are under a duty to bring full and accurate findings as to the originating factors which establish the Communities' entitlement to own resources, and to pay over all resources so established, even where not collected, except when recovery has been impossible for reasons of force majeure. It may be concluded from the existence of these obligations and from the financial responsibility which goes with them — without, however, adopting a position on the particular situation existing during the transitional period — that the rights of a Member State into which goods subject to payment of customs duties or levies have been smuggled are also infringed by the smuggling offence.

The reasoning followed in Mertens (already referred to) should be followed here. However, the interest of the Communities, both in the existence of proceedings (between a State and individuals assessed to payment of resources) to which they are not parties directly, and in the outcome of such proceedings, is undeniable. Although the power to take action lies, in the first instance, with the Member States, the indirect interest of the Communities in proceedings against individuals could justify the intervention of the Communities in the action, provided that the procedural rules of the Member State in which the action is brought permit the presence of an intervener during the proceedings.

The Commission suggests that the questions referred should be answered as follows:

‘1. The offence of smuggling infringes, in different ways, both the rights of the European Communities and those of the Member State required to establish and collect the Community resources, payment of which has been evaded. During the transitional period of partial application of the system of contributions, the rights of any other Member State may also be infringed by that offence. Nevertheless, as a matter of procedure, the Member States alone may be considered to be parties entitled to take proceedings against the accused to recover Community revenue, payment of which has been evaded. 2. The national court is required to give notice to the Community of the initiation of criminal proceedings for smuggling if the provisions of national law require it to give such notice not only to those parties which are themselves entitled to take proceedings against the accused, but also to parties whose interests could justify an intervention in the case, provided that national law makes provision for intervention in such proceedings.’

During the oral procedure, which took place on 24 March 1977, the Commission of the EEC was represented by its Legal Adviser, Mr Campogrande, acting as Agent.

The Advocate-General delivered his opinion at the hearing on 27 April 1977.

Decision

1. By order of 15 November 1976, which reached the Court on the following 23 November, the Pretura of Cento has referred, under Article 177 of the EEC Treaty, two questions for a preliminary ruling on the interpretation of the Decision of the Council of 21 April 1970 on the replacement of financial contributions from Member States by the Communities' own resources (OJ, English Special Edition 1970 (I), p. 224) and of Regulation (EEC, Euratom, ECSC) No 2/71 of the Council of 2 January 1971 implementing the said decision (OJ, English Special Edition 1971 (I), p. 3). Those questions have been raised in the context of criminal proceedings instituted against a person unknown for a possible smuggling offence in respect of goods subject to the Common Customs Tariff and to the agricultural levies.

2. Italian procedural law provides that all ‘injured parties’ must be given notice of the commencement of criminal proceedings. With a view to applying that provision of national law it is asked whether, in the case of a smuggling offence, by virtue of the Decision of the Council of 21 April 1970, the ‘injured party’ is only the Community or the Community together with the Member States to which the levying of customs duties for and on account of the Community has been assigned. More particularly, it is asked whether the national court must, in accordance with its own procedure, notify the Community that criminal proceedings have been instituted in respect of the smuggling offence so as to enable it to apply for recovery of the customs duties payment of which has been evaded.

3. Thus it suffices to examine whether the Community institutions are empowered to take proceedings for the recovery of the duties in question.

4. Article 6 (1) of the Decision of 21 April 1970 provides that the own resources allocated to the Communities, amongst which are included the duties under the Common Customs Tariff, ‘shall be collected by the Member States in accordance with national provisions imposed by law, regulation or administrative action.’

5. The combined provisions of Articles 1, 6 (2) and (3), 7 (1) and 13 (2) of Regulation No 2/71 make it clear that the Member States are required not only to establish all own resources, but also to make available to the Communities all own resources so established, including any sums which may not have been collected, unless collection has been impossible for reasons of force majeure.

6. Thus it continues to be the task of the Member States to undertake prosecutions and proceedings for the purpose of the recovery of own resources and to continue to take steps to that end in respect of persons liable for payment. It follows that in the present state of Community law only the Member States and their authorities are empowered to take proceedings before national courts for the purpose of claiming payment of Community revenue constituting own resources.

Costs

7. The costs incurred by the Commission, which has 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 on costs is a matter for that court.

On those grounds, THE COURT in answer to the questions referred to it by the Pretura of Cento by order of 15 November 1976, hereby rules: