Judgment of the Court (First Chamber) 2 May 1985

In Joined Cases 154 and 155/83 REFERENCES to the Court under Article 177 of the EEC Treaty by the Hessischer Verwaltungsgerichtshof [Higher Administrative Court of Hesse] (Eighth Senate) for a preliminary ruling in the proceedings pending before that court between

THE COURT (First Chamber), composed of: G. Bosco, President of Chamber, T. Koopmans and R. Joliét, Judges, Advocate General: C. O. Lenz Registrar: H. A. Rühi, Principal Administrator

gives the following

JUDGMENT

Facts and issues

The facts of the case, the course of the procedure and the 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 written procedure

Regulation No 1259/72 of the Commission of 16 June 1972 (cited above) and the various regulations amending it were adopted with a view to reducing butter stocks by providing for the sale of butter at a reduced price by tender to certain Community processing undertakings. Tenderers must undertake to process the butter in a certain way, and successful tenderers are required, before taking over each quantity, to lodge a processing security which may be released only for quantities in respect of which they have furnished proof to the competent authority that the prescribed conditions have been met.

As is stated in the grounds of the orders for reference, the undertaking Joseph Hoche (hereinafter referred to as ‘Hoche’) and the undertaking Roomboterfabriek ‘De Beste Boter’ (hereinafter referred to as ‘Best’) respectively purchased, on 19 March 1974 and 19 June 1974, 120000 kg and 90000 kg of butter from German intervention stocks from the Einfuhr- und Vorratsstelle für Fette [Fats Import and Supply Office]. The Bundesanstalt für landwirtschaftliche Marktordnung, the defendant in the main proceedings, is the successor in law of the Einfuhr- und Vorratsstelle. The sales took place subject to the condition that the butter must be processed into concentrated butter, from which specified products were then to be manufactured, one of which was powder for the preparation of edible ices. As a guarantee that they would comply with that condition, the plaintiffs in the main proceedings lodged processing securities amounting to DM 92001.42 (in Hoche's case) and DM 224744 (in Best's case), in the form of a bank guarantee (Bankbürgschaft).

Hoche sold a consignment of 22050 kg of butter direct to the undertaking Dr Otto Suwelack Nachfolger KG, the party joined in the main proceedings [hereinafter referred to as ‘Suwelack’]. Best sold a consignment of 58800 kg of butter to Hoche, which sold it after melting it down and concentrating it to Suwelack. Suwelack had given Hoche an undertaking that it would process the concentrated butter in accordance with the abovementioned EEC regulation.

Suwelack processed the concentrated butter and presented to the customs authorities for forwarding to the supervisory authorities a certificate of the use of the raw materials and a processing declaration dated 23 July 1974. In its processing declaration it confirmed that it had manufactured from the concentrated butter a powder for the preparation of edible ices falling within subheading 18.06 D or 21.07 F of the Common Customs Tariff.

It became apparent that a considerable quantity of the powder was not sold by Suwelack to ice-cream manufacturers. The Betriebsprüfungsstelle Zoll [fiscal audit office] of the Oberfinanzbezirk [tax district] Münster found that it had sold the powder, inter alia, to Lebensmittelwerke Bleckede AG, which had separated out the sugar and sold it, inter alia, to Karina Schokoladenfabrik, and had then processed the rest of the powder into milk powder preparations of the types 250 W, 250 S, 78/22 and 80/20, containing varying proportions of ice-cream powder. The Zolltechnische Prüfungs- und Lehranstalt [Customs Laboratory and Training College] of Cologne examined samples from that production and reached the conclusion that the powder at issue must be regarded as cream powder containing added sugar falling within tariff heading 04.02.

As a result, the Nuremberg Customs Office, which was responsible for monitoring the correct processing of the goods, informed the Einfuhr- und Vorratsstelle für Fette that the concentrated butter manufactured by Hoche had not been used for the correct purposes. By Decisions No 4 of 20 January 1975 and No 14 of 19 February 1975, the Einfuhr- und Vorratsstelle für Fette declared the plaintiffs' processing security forfeit and demanded payment of the sums involved. The plaintiffs' objections against those decisions were rejected by it on 3 March 1975. The plaintiffs then brought actions for the annulment of both sets of decisions and for their replacement by a decision to release the securities.

By two orders of 30 May 1983, the Hessischer Verwaltungsgerichtshof decided pursuant to Article 177 of the EEC Treaty to stay the proceedings until the Court of Justice had given a preliminary ruling on the following questions:

‘(a) Are the requirements of Article 6 (1) (c) (third option) of Regulation (EEC) No 1259/72 of the Commission of 16 June 1972 (Official Journal, English Special Edition 1972 (II), p. 559) as amended by Article 1 (2) of Regulation -(EEC) No 2161/72 of the Commission of 10 October 1972 (Official Journal, English Special Edition 1972 (10 to 31 October), p. 5) to be regarded as satisfied even if the powder for the preparation of edible ices falling within tariff subheadings Nos ex 18.06 D or ex 21.07 F of the Common Customs Tariff has ultimately not been used for the preparation of edible ices and if that powder has been separated into its constituent parts by further processing and those ingredients have been further processed into milk powder preparations and chocolate?

b) Does the successful tenderer's duty to furnish proof pursuant to the first sentence of Article 18 (2) of Regulation No 1259/72 as amended by Article 3 of Regulation (EEC) No 1237/73 of the Commission of 10 May 1973 (Official Journal 1973, L 128, p. 1) also extend to processing which takes place after the manufacture of the powder for the preparation of edible ices in accordance with Article 6 (1) (c) (third option) of Regulation Nol259/72 as amended by Article 1 (2) of Regulation No 2161/72?

c) Does Article 6 (a) (which was inserted by Regulation (EEC) No 1910/73 of the Commission of 13 July 1973 (Official Journal 1973, L 196, p. 10)) apply, as is suggested by the preamble, only to products falling within heading No 19.08 of the Common Customs Tariff or does it include ice-cream products falling within tariff subheadings Nos ex 18.06 D or ex 21.07 F of the Common Customs Tariff?

d) Does the ‘powder for the preparation of edible ices falling within subheadings Nos ex 18.06 D or ex 21.07 F of the Common Customs Tariff’ in Article 6 (1) (c) as amended by Regulation No 2161/72 represent the sole product of that category into which the butter may be processed or, within the framework of the further processing permitted by Article 6 (a), may all the products falling within subheadings Nos ex 18.06 D and ex 21.07 F be manufactured without the security's being forfeited?

e) Does the fact that Article 18 (2) as amended by Regulation No 1237/73 makes no reference to Article 6 (a) mean that an infringement of Article 6 (a) does not affect the release of the security or must the release of the security be refused if it is established that there has been an infringement of the said article?

f) Is the addition of the binding agent sodium caseinate inconsistent with the aim of Article 6 (1) (c) (third option) of Regulation No 1259/72, which is to promote the manufacture of ice-cream powder suitable for consumption, if the result of the addition thereof is a product which may not be used in the manufacture of ice-cream under the legislation relating to food production and distribution in the Federal Republic of Germany, although it may in some Member States?

g) If the addition of sodium caseinate is held to be of no significance, is it relevant for the release of the security under Article 18 (2), first sentence, of Regulation No 1259/72 as amended by Article 3 of Regulation No 1237/73 that the successful tenderer is unable to prove that the powder for the preparation of edible ices mixed with sodium caseinate has been dispatched to Member States such as Belgium, Luxembourg and the Netherlands which allow the use of the binding agent even for ice-cream powder?’

The orders making the reference were lodged at the Court Registry on 27 July 1983.

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by Hoche and Best, the plaintiffs in the main proceedings, represented by R. Leiers, Rechtsanwalt; the Bundesanstalt für landwirtschaftliche Marktordnung, the defendant in the main proceedings, represented by Mr Schwieck and Mr Wolski; Dr Otto Suwelack Nachfolger KG, the party joined in the main proceedings, represented by K. H. Wiech, Rechtsanwalt; and the Commission of the European Communities, represented by P. Karpenstein, a member of its Legal Department, acting as Agent.

In view of the fact that the questions contained in the two orders for reference were identical in content, the Court, by order of 21 September 1983, joined the cases for the purposes of the. procedure and the judgment.

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.

By order of 14 March 1984, the Court also decided, pursuant to Article 95 (1) and (2) of the Rules of Procedure, to assign the joined cases to the First Chamber.

II — Written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the European Community

The undertakings Hoche and Best submitted answers to the following questions:

A — Is it necessary, for the purposes of the decision on whether the processing security should be released, to ascertain whether the powder for the preparation of edible ices has been subjected to further processing at a later stage?

The plaintiffs state in essence that Article 6 (1) (c) of Regulation No 1259/72 is explicit in requiring only the making of a processed product and that it does not contain any requirements as to the end use of the processed product. Consequently the end use of the product has no incidence on the release of the security provided it is established that the requirements expressly laid down in Regulation No 1259/72 are satisfied.

B — What conditions must be satisfied in order for the security to be released?

The plaintiffs in the main proceedings consider in particular the question whether the examination of the conditions for the release of the security may and must have regard to any further processing and marketing after the processed product referred to in Article 6 (1) (c) has been made.

The plaintiffs argue that after the production of the powder for the preparation of edible ices referred to in Article 6 (1) (c), there is no further stage of marketing or processing which is subject to customs investigation and relevant to the duties regarding stock records, storage, processing declarations and active and passive cooperation.

They say that under Article 6 of Regulation No 1259/72, the purchaser of butter is required only to have the butter processed into concentrated butter (paragraph (1) (a)), to have incorporated into it in the course of that processing certain specified substances ((1) (b)), and to have the intermediate product resulting from that operation processed into certain specified products ((1) (c)), including powders for the preparation of edible ices. That powder is the processed product.

In the plaintiffs' view that interpretation flows from the German Milchfettverbilligungsverordnung [Regulation relating to the sale of milkfat at a reduced price] and Article 5 of that regulation in particular, from points 6 (3) and 6 (4) of the accompanying circular, and from the Bekanntmachung liber den Absatz von Butter zu herabgesetzten Preisen an bestimmte Bearbeitungsbetriebe in der Gemeinschaft [Notice concerning the sale of butter at a reduced price to certain Community processing undertakings] of 13 July 1972 (Bundesanzeiger No 131 of 18 July 1972), as well as from the preamble to and Article 18 (2) (d) and (3) of Regulation No 1259/72.

Since, for the reasons stated above, the subsequent use of the processed product no longer requires verification, the successful tenderer's duty to furnish proof similarly cannot extend to the stages of processing following the production of powder for the preparation of edible ices within the meaning of Article 6 (1) (c) of Regulation No 1259/72. That interpretation is confirmed by the judgment of the Court in Joined Cases 99 and 100/76, between the same parties ([1977] ECR 861).

C — Does Article 6 (a) also apply to powder for the preparation of edible ices?

The plaintiffs in the main proceedings argue that powder for the preparation of edible ices is expressly excluded from the scope of Article 6 (a) of Regulation No 1259/72. In support of that contention, the plaintiffs refer to the preamble to Commission Regulation No 1910/73 cited above, which refers solely to products falling within tariff heading 19.08.

Alternatively, the plaintiffs submit that even if Article 6 (a) also applies to powder for the preparation of edible ices falling within tariff subheadings 18.06 D or 21.07 F, it does not follow, for the reasons stated at B, above, that the security is forfeit if the powder for the preparation of edible ices is not subsequently processed into edible ices.

D — Does Article 6 (a) of Regulation No 1259/72 permit subsequent processing of the powder for the preparation of edible ices?

The plaintiffs argue that even if Article 6 (a) of the regulation applied to powder preparations falling within tariff subheadings ex 18.06 D and ex 21.07 F, it would not prohibit subsequent processing of the powder for the preparation of edible ices. Article 6 (a) permits subsequent processing provided that the resulting products fall within one of the tariff headings referred to in Article 6 and that products falling within any other heading have not been produced at an intermediate stage of such processing.

E — May infringement of Article 6 (a) affect the release of the security?

The plaintiffs take the view that for the reasons set out at B, above, none of the steps taken in stages of processing subsequent to the production of the processed product (powder for the preparation of edible ices) is to be taken into consideration for the purposes of the examination prior to release of the security. That contention is borne out in particular by Article 18 (2) and (3) of the regulation, which provides for immediate release of the security when the processed product has been produced within the prescribed period. An infringement of Article 6 (a) after the processed product has been produced cannot, therefore, affect the release of the security.

F — Is the suitability for consumption of the powder for the preparation of edible ices governed by the provisions of the Speiseeisverordnung [Regulation relating to ice-cream] applicable in the Federal Republic of Germany?

The plaintiffs state that the German Speiseeisverordnung prohibits the addition of sodium caseinate. The use of sodium caseinate is not regulated in the other Member States. Its addition does not prevent the powder from being regarded as a powder complying with Regulation No 1259/72 and the amending regulations.

G — Is the successful tenderer required to furnish proof that the powder for the preparation of edible ices has been dispatched to Member States which permit the use of sodium caseinate in the production of ice-cream?

The plaintiffs argue that even on the supposition that its subsequent use in the production of edible ices for consumption must be examined and established for the purposes of releasing the security, it is scarcely conceivable that the competent administrative authorities should be required to ascertain whether the national rules on ice-cream manufacture have been observed. The answer to that question must therefore be negative. The plaintiffs add that an affirmative answer would considerably limit the practical effect of the regulation, since it is difficult for a successful tenderer to furnish proof that the national rules have been complied with in stages of processing subsequent to the manufacture of the powder for the preparation of edible ices.

In written observations submitted to the Court, the Bundesanstalt fir landwirtschaftliche Marktordnung contends that the Court should give the following answers to the questions referred for a preliminary ruling:

a) The requirements laid down in Article 6 (1) (c) (third option) of Regulation No 1259/72 of 16 June 1972 (Official Journal, English Special Edition 1972 (II), p. 559), as amended by Article 1 (2) of Regulation No 2161/72 of 10 October 1972 (Official Journal, English Special Edition 1972 (10 to 31 October), p. 5), must be held not to have been fulfilled where powder falling within tariff subheadings ex 18.06 D or ex 21.07 F has not finally been used for the preparation of edible ices.

b) and (e) The duty to furnish proof imposed upon the successful tenderer by Article 18 (2) (first sentence) of Regulation No 1259/72, as amended by Article 3 of Regulation No 1237/73 of 10 May 1973 (Official Journal 1973, L 128, p. 1), also applies to the stages of processing following the production of the powder referred to in Article 6 (1) (c) (third option) of Regulation No 1259/72, as amended by Article 1 (2) of Regulation No 2161/72. The fact that Article 18 (2) makes no reference to Article 6 (a) as inserted by Regulation No 1910/73 must not be interpreted as meaning that an infringement of Article 6 (a) does not affect the release of the security. The release of the security must therefore also be refused if it is established that there has been such an infringement.

c) Article 6 (a) of Regulation No 1259/72, as inserted by Regulation No 1910/73 of 13 July 1973 (Official Journal 1973, L 196, p. 10), applies to edible ices falling within tariff subheadings ex 18.06 D and ex 21.07 F as well as products falling within tariff heading 19.08.

d) The ‘powder for the preparation of edible ices falling within subheadings Nos ex 18.06 D or ex 21.07 F of the Common Customs Tariff’ in Article 6 (1) (c) as amended by Regulation No 2161/72 represents the only permitted use of the product. Further processing into products other than those referred to in Article 6 (1) (c) of Regulation No 1259/72, as amended by Regulation No 2161/72, is therefore prohibited.

f) and (g) The addition of the binding agent sodium caseinate is not contrary in principle to the aim of Article 6 (1) (c) (third option) of Regulation No 1259/72, even if the result of adding it is a powder which may not be used in all the Member States. In order that the security may be released under Article 18 (2) (first sentence) of Regulation No 1259/72 as amended by Article 3 of Regulation No 1237/73, it is necessary for the successful tenderer to prove that the powder mixed with sodium caseinate has been dispatched to Member States which allow the use of the binding agent in the manufacture of powder for the preparation of edible ices.

In support of those submissions, the defendant advances the following arguments.

A — Question (a)

The defendant argues that the answer to Question (a) is to be found in Article 6 (1) (c) of Regulation No 1259/72, from which it is clear that what the regulation intends and requires is the preparation of edible ices, and again from the second half of the same subparagraph, which, by providing that the powder for the preparation of edible ices must be suitable for consumption, implies that the powder must actually be used for that purpose. That interpretation is compatible with the wording of the first recital of the preamble to Regulation No 2161/72 of the Commission of 10 October 1972, cited above. Moreover, it is corroborated by the fact that the powder for the preparation of edible ices cannot be anything other than an intermediate product, so that only the preparation of edible ices constitutes the final use of the powder. In support of its argument, the defendant cites the judgments of the Court of 11 May 1977 (Joined Cases 99 and 100/76, between the same parties, [1977] ECR 861) and of 14 January 1982 (Case 64/81 Corman [1982] ECR 13) and the provisions of Regulation No 1910/73 of the Commission of 13 July 1973 (cited above) inserting Article 6 (a).

B — Questions (b) and (e)

The defendant contends that in view of the observations set out above, it must be held that the aim of the regulations on the disposal of surplus butter can be attained only if the powder referred to in Article 6 (1) (c) is used exclusively for the preparation of ice-cream; hence it must be a condition for the release of the security that the powder should actually have been used for the manufacture of ice-cream, from which it follows that the duty to furnish proof must extend to the stages of processing following the making of the products referred to in Article 6 (1) (c).

In support of that contention, the defendant refers to the abovementioned judgment of the Court in Joined Cases 99 and 100/76, which related to the interpretation of Article 18 of Regulation No 1259/72 as amended by Regulation No 1237/73 of 10 May 1973, cited above.

Furthermore, the preamble to Regulation No 1910/73 makes it clear that Article 6 (a) is merely intended to clarify the scope of the rule laid down in Article 6 (1) (c) of Regulation No 1259/72. Since Article 18 (2) of Regulation No 1259/72 refers to Article 6 of the regulation, it is unnecessary for it to refer expressly to Article 6 (a).

C — Question (c)

The defendant argues that at the time of the entry into force of Regulation No 1910/73, the reference in the original version of Regulation No 1259/72 to processed products falling within tariff heading 19.08 had already been supplemented by the list of products contained in Regulations Nos 1716/72 (Official Journal, English Special Edition 1972 (III), p. 848) and 2161/72; hence the products covered by Article 1 of Regulation No 1910/73 include all the products referred to in Article 6 (1) (c) of Regulation No 1259/72. In the defendant's view, the general scheme of the provision does not permit any other interpretation.

D — Question (d)

The defendant argues that only powders falling within tariff subheadings ex 18.06 D and ex 21.07 F within the meaning of Article 6 (1) (c) represent a permitted use of the product. Any other interpretation would encourage the diversion of such products from the use to which the preamble to the regulation requires them to be put.

E — Questions (J) and (g)

In the defendant's view, the answers to questions (f) and (g) must be as it has indicated because the aim of the measure provided for by Regulation No 1259/72 may be satisfied even though marketing of the processed product is not permitted in all the Member States. However, where use in accordance with the aims of the regulation may only take place in some Member States, the successful tenderer must furnish proof that the product has been used only in those States.

Firma Dr Otto Suwelack Nachfolger KG, the party joined to the proceedings, submits that the Court should rule upon the questions in the order for reference as follows.

Question (a)

The processed products referred to in Article 6 (1) (c) of Regulation No 1259/72 as amended by Regulation No 2161/72 include, inter alia, both powders for the preparation of edible ices falling within tariff subheadings ex 18.06 D and ex 21.07 F and edible ices falling within tariff subheadings ex 18.06 B and ex 21.07 C. Further processing of the powder for the preparation of edible ices is not required.

Question (b)

Under Article 18 (2) of Regulation No 1259/72 as amended by Regulation No 1237/73, the successful tenderer must, in order to obtain the release of the security, furnish proof that a processed product referred to in Article 6 of Regulation No 1259/72 has been produced within the period laid down in that article.

Question (c)

Question (c) requires an answer only if the proposed answer to Question (e) is not accepted. In the alternative, Suwelack suggests the following answer:

Article 6 (a), which was inserted into Regulation No 1259/72 by Regulation No 1910/73, applies only to processed products falling within heading 19.08 of the Common Customs Tariff within the meaning of Article 6 of Regulation No 1259/72.

Question (d)

This question calls for a reply only if the suggested answer to Question (e) or alternatively the suggested answer to Question (c) is not accepted. In the alternative Suwelack suggests the following answer:

Any processed product referred to in Article 6 (1) (c) of Regulation No 1259/72 may subsequently be processed into any other processed product covered by that subparagraph provided that the resulting products fall within one of the tariff headings referred to therein and that products falling within any other tariff heading are not produced at an intermediate stage of such processing.

Question (e)

The answer to this question is contained in the answer to Question (b).

Question (f)

In regard to the composition of powders for the preparation of edible ices falling within tariff subheading ex 18.06 D or ex 21.07 F within the meaning of Article 6 (1) (c) of Regulation No 1259/72, as amended by Regulation No 2161/72, the decisive criteria are the requirements contained in Regulation No 1259/72 itself and the terms of the aforesaid tariff headings.

Question (g)

The answer to this question is contained in the answer to Question (b).

In support of its submissions, Suwelack cites the judgment of the Court in Joined Cases 99 and 100/76 cited above, and adduces the following arguments.

A — Questions (a) and (b)

It states in substance that the principle of legal certainty, as interpreted by the Court of Justice in its judgment of 9 July 1981 (Case 169/80 Administration des douanes v Gondrand Frères SA and Garancini SA [1981] ECR 1931), requires that rules imposing conditions on individuals should be clearly expressed in the relevant provisions. The conditions at issue in this case make no provision of any kind regarding the subsequent use within the prescribed period of the processed product. Furthermore, an interpretation other than the one it advocates would make the release of the security under Article 18 of Regulation No 1259/72 merely provisional, a consequence which cannot be justified on the basis of the provisions.

B — Question (c)

That question calls for a reply only if the suggested answer to Question (e) is not accepted. Although Suwelack acknowledges that the wording of Article 6 (a) covers all the relevant processed products, it contends that the article must be interpreted in the light of the preamble to Regulation No 1910/73, which shows that Article 6 (a) applies only to processed products falling within tariff heading 19.08.

C — Question (d)

Subject to the same proviso, Suwelack argues that neither the regulations nor their preambles contain the slightest suggestion that a processed product may not undergo any further processing whatsoever.

D — Question (e)

Articles 6, 6 (a) and 18 of Regulation No 1259/72 must be read in conjunction with one another. Suwelack considers that if the Commission had wished to make the release of the security dependent on compliance with the restrictions contained in Article 6 (a) when it adopted that article, it would have amended Article 18. Any other interpretation would be contrary to the principle of legal certainty as interpreted in the aforementioned judgment of the Court. Forfeiture of the security on the ground of noncompliance with the restriction on processing introduced by Article 6 (a) would in any event be a penalty disproportionate to the infringement.

E — Questions (/) and (g)

Suwelack submits that the national legislation on foodstuffs is of no relevance to the application of Regulation No 1259/72. The question of which States permit the marketing of the ice-cream therefore has no effect on the classification of a product as a processed product covered by Regulation No 1259/72. That regulation refers solely to the relevant tariff headings. This interpretation receives further support from a line of decisions of the Court in which items of national legislation relating to foodstuffs have been held to constitute measures having an effect equivalent to quantitative restrictions within the meaning of Article 30 of the EEC Treaty.

Suwelack points out that as a rule successful tenderers are required to furnish only the proof required by Article 18 of Regulation No 1259/72. It concludes that they are not required to prove that powders produced by processing undertakings with a view to the subsequent preparation of edible ices have been dispatched to a State whose legislation permits edible ices produced from those powders to be sold to the consumer. In any event, the fact that the product is dispatched to such a Member State does not mean that it will ultimately be consumed there, and besides the provisions at issue do not contain any restrictions as to the place of destination.

In its written observations, the Commission of the European Communities proposes that the Court should answer the questions referred to it for a preliminary ruling as follows:

1) Regulation No 1259/72 as amended by Regulation Nos 2161/72, 1237/73 and 1910/73 must be interpreted as meaning:

a) that as a general principle, the forms of processing enumerated in Article 6 (1) (c) also represent the final destination of the butter purchased at a reduced price and that further processing is permitted only if the criteria contained in Article 6 (a) are complied with, that is to say, if the products resulting from such subsequent processing also fall within one of the tariff headings referred to in Article 6 (1) (c) and if processing does not create a product falling within any other tariff heading;

b) that the burden of proof placed upon the successful tenderer by Article 18 (2) also extends to stages of processing subsequent to those referred to in Article 6 (1) (c); and

c) that Article 6 (a) applies to all the products referred to in Article 6 (1) (c).

2) The addition of a binding agent the use of which in the preparation of edible ices is permitted only in certain Member States does not in itself constitute a bar to enjoyment of the advantages arising under Regulation No 1259/72.

In support of those propositions the Commission refers in the first place to the aims of the Community regulations. It argues in favour of a strict interpretation: the destination of the butter sold at a reduced price must be restricted to the cases expressly allowed.

A — The definition of final processing (Questions (a) and (d))

In the Commission's view, Article 6 (a), which was inserted by Regulation No 1910/73, made the system established by Article 6 of Regulation No 1259/72 more flexible by permitting further processing of the products referred to as the end products subject to the twofold condition that the product of such further processing should also fall within one of the tariff headings enumerated in Article 6 (1) (c) and that a product falling within another heading of the Common Customs Tariff is not produced in the process. Those conditions are cumulative. In this case, as it appears from the national court's findings of fact, a product not falling within either tariff subheading 18.06 D or 21.07 F was produced when the sugar was separated from the powder and sold separately.

B — The extent of the duty to furnish proof (Questions (b) and (e))

The Commission states in substance that the first subparagraph of Article 18 (2) refers to all the conditions contained in Article 6, including paragraph (1) (e), which requires the successful tenderer to impose on all subsequent purchasers the same processing requirements as those he has undertaken to carry out. Verification that those requirements have been complied with logically requires an examination of processing stages subsequent to those referred to in Article 6 (1) (c). Any other interpretation would in any event run counter to the scheme of the regulations at issue.

The Commission's interpretation is not contradicted by the fact that Article 18 (2) was not amended when Article 6 (a) was introduced. Article 6 (a) clearly constitutes a partial exception to the exclusive list of permitted forms of processing contained in Article 6 (1) (c). By its nature it must be read into that provision and should therefore also be included within the scope of the burden of proof placed on the successful tenderer by Article 18 (2). At most it may be conceded that the plaintiffs were not subject to a formal duty of proof as regards the requirements of Article 6 (a), but that admission is of no relevance to this case.

C — The scope of Article 6 (a) (Question (c))

In the Commission's view, a provision framed in clear and unequivocal terms takes precedence over an ambiguously worded recital in a preamble for the simple reason that it is higher-ranking as a source of law. The fact that only tariff heading 19.08 received a mention in the drafting of Regulation No 1910/73 cannot therefore limit the scope of Article 6 (a). On the contrary, that article must apply to all the products referred to in Article 6 (1) (c). In any event a more restrictive interpretation would not make it possible to release the security furnished by the plaintiffs.

D — The significance of the addition of sodium caseinate as a binding agent (Questions (f) and (g))

The Commission refers to the judgment of the Court of Justice in Case 64/81, cited above, and argues that it is irrelevant whether the ice-cream powder may be sold in all the Member States. However, it points out that it would be saying too little to say that the plaintiffs are unable to establish that the ice-cream powder manufactured by the party joined to the proceedings, to which sodium caseinate was added, was sold with a view to the manufacture of edible ices for retail in a Member State which permits the addition of the agent. In fact it has been clearly established that the powder mixture was never used for the manufacture of icecream. In this case, since the provisions on the final destination of the product laid down in Regulation No 1259/72 have been infringed, the addition of sodium caseinate is in any event irrelevant for the purposes of interpreting Article 18 (2) of the regulation.

III — Oral procedure

The plaintiffs in the main proceedings, represented by Dr Rolf Leiers, Rechtsanwalt, the defendant in the main proceedings, represented by Wolfgang Wolski, acting as Agent, the party joined to the main proceedings, represented by Klaus-H. Wiech, Rechtsanwalt, and the Commission of the European Communities, represented by Dr Peter Karpenstein, acting as Agent, and Noël Devisch, an official of the European Communities, acting as expert, presented oral argument at the sitting on 17 May 1984.

The Advocate General delivered his opinion at the sitting on 5 July 1984.

Decision

1. By two orders of 30 May 1983, which were received at the Court on 27 July 1983, the Hessischer Verwaltungsgerichtshof [Higher Administrative Court of Hesse] referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a number of questions on the interpretation of Articles 6, 6 (a) and 18 of Regulation (EEC) No 1259/72 of the Commission of 16 June 1972 on the disposal of butter at a reduced price to certain Community processing undertakings (Official Journal, English Special Edition 1972 (II), p. 559), as amended by Regulations of the Commission Nos 2161/72 of 10 October 1972, 1237/73 of 10 May 1973, and 1910/73 of 13 July 1973 (Official Journal, English Special Edition 1972, 10 to 31 October, p. 5; Official Journal 1973, L 128, p. 1; L 196, p. 10).

2. The questions were raised in the course of proceedings brought by two undertakings, Firma Joseph Hoche, of Speikern in the Federal Republic of Germany, and Roomboterfabriek ‘De Beste Boter’, of Best in the Netherlands, against the Bundesanstalt für landwirtschaftliche Marktordnung [Federal Office for the Organization of Agricultural Markets] in Germany. The plaintiffs in the main proceedings are supported by the party joined to the main proceedings, Firma Dr Otto Suwelack Nachfolger KG, of Billerbeck in the Federal Republic of Germany.

3. Because the questions contained in the two orders for reference were identical in content, the Court, by order of 21 September 1983, joined the cases for the purposes of the procedure and the judgment.

4. The main actions were brought against decisions of the relevant national intervention agency declaring forfeit the processing securities furnished by the plaintiffs, which had purchased intervention butter at a reduced price, on the ground that the end use to which the processed product was put was in breach of the Community regulations.

5. With a view to making it possible for butter to be used as a substitute for other fats in order to reduce butter surpluses by creating new outlets, the Commission adopted Regulation No 1259/72, which established a procedure for the sale of butter by tender at a reduced price to certain processing undertakings in the Community. Article 6 of that regulation provides that an undertaking may only take part in that procedure if it gives certain undertakings, which are enumerated in paragraph (1) (a), (b), (c), (d) and (e). Article 6, (1) (c) (as amended) provides that it must undertake ‘to have the products referred to under (b) [the concentrated butter] processed only into : products falling within heading No 19.08 of the Common Customs Tariff, or edible ices falling within subheadings Nos ex 18.06 B and ex 21.07 C of the Common Customs Tariff, of a milkfat content of less than 15%, or powder for the preparation of edible ices falling within subheading No ex 18.06 D or ex 21.07 F of the Common Customs Tariff, of a milkfat content of 33% or less and suitable for consumption without any treatment other than the addition of water and refrigeration. Processing into the products listed above shall take place in the Community within 120 days from the day of removal from storage referred to in Article 13 (2).’

6. In order to ensure that the undertaking with regard to processing is carried out, the successful tenderer must furnish a security, the amount of which is fixed in such a way as to cover the difference between the market price of butter and the minimum selling price (Articles 9 (2) and 12 of Regulation No 1259/72).

7. Article 18 (2) of Regulation No 1259/72 provides that except in cases of force majeure, the processing deposit is to be released only for quantities in respect of which the successful tenderer has furnished proof, as provided therein, that the conditions referred to in Article 6 have been met.

8. Finally, by Regulation No 1910/73 of 13 July 1973, cited above, the Commission inserted into the original regulation, No 1259/72, an article numbered 6 (a) which reads as follows: ‘Further processing of the products referred to in Article 6 (1) (c) shall be allowed where such products fall within the heading 1 referred to in that Article without, at an intermediate stage of such processing, resulting in a product which falls within any other heading.’

9. The national court appears to regard it as established that the concentrated butter was duly processed into powder for the preparation of edible ices in accordance with Article 6 (1) (c) of Regulation No 1259/72. It asks whether the subsequent separation of the processed product and its use for purposes other than the production of edible ices justifies the forfeiture of the security under Article 18 (2) of Regulation No 1259/72. In that connection it has referred the following seven questions to this Court for a preliminary ruling: ‘(a) Are the requirements of Article 6 (1) (c) (third option) of Regulation (EEC) No 1259/72 of the Commission of 16 June 1972 (Official Journal, English Special Edition 1972 (II), p. 559) as amended by Article 1 (2) of Regulation (EEC) No 2161/72 of the Commission of 10 October 1972 (Official Journal, English Special Edition 1972 (10 to 31 October), p. 5) to be regarded as satisfied even if the powder for the preparation of edible ices falling within tariff subheadings Nos ex 18.06 D or ex 21.07 F of the Common Customs Tariff has ultimately not been used for the preparation of edible ices and if that powder has been separated into its constituent parts by further processing and those ingredients have been further processed into milk powder preparations and chocolate? (b) Does the successful tenderer's duty to furnish proof pursuant to the first sentence of Article 18 (2) of Regulation No 1259/72 as amended by Article 3 of Regulation (EEC) No 1237/73 of the Commission of 10 May 1973 (Official Journal 1973, L 128, p. 1) also extend to processing which takes place after the manufacture of the powder for the preparation of edible ices in accordance with Article 6 (1) (c) (third option) of Regulation No 1259/72 as amended by Article 1 (2) of Regulation No 2161/72? (c) Does Article 6 (a) (which was inserted by Regulation (EEC) No 1910/73 of the Commission of 13 July 1973 (Official Journal 1973, L 196, p. 10) apply, as is suggested by the preamble, only to products falling within heading No 19.08 of the Common Customs Tariff or does it include ice-cream products falling within tariff subheadings Nos ex 18.06 D or ex 21.07 F of the Common Customs Tariff? (d) Does the ‘powder for the preparation of edible ices falling within subheadings Nos ex 18.06 D or ex 21.07 F of the Common Customs Tariff’ in Article 6 (1) (c) as amended by Regulation No 2161/72 represent the sole product of that category into which the butter may be processed or, within the framework of the further processing permitted by Article 6 (a), may all the products falling within subheadings Nos ex 18.06 D and ex 21.07 F be manufactured without the security being forfeited? (e) Does the fact that Article 18 (2) as amended by Regulation No 1237/73 makes no reference to Article 6 (a) mean that an infringement of Article 6 (a) does not affect the release of the security or must the release of the security be refused if it is established that there has been an infringement of the said article? (f) Is the addition of the binding agent sodium caseinate inconsistent with the aim of Article 6 (1) (c) (third option) of Regulation No 1259/72, which is to promote the manufacture of ice-cream powder suitable for consumption, if the result of the addition thereof is a product which may not be used in the manufacture of ice-cream under the legislation relating to food production and distribution in the Federal Republic of Germany, although it may in some Member States? (g) If the addition of sodium caseinate is held to be of no significance, is it relevant for the release of the security under Article 18 (2), first sentence, of Regulation No 1259/72 as amended by Article 3 of Regulation No 1237/73 that the successful tenderer is unable to prove that the powder for the preparation of edible ices mixed with sodium caseinate has been dispatched to Member States such as Belgium, Luxembourg and the Netherlands which allow the use of the binding agent even for ice-cream powder?’

10. Those questions may be subdivided into three groups. Questions (c) and (d), which concern the definition of the products falling within the scope of Article 6 (a) (cited above), form the first group. A second group, composed of Questions (a), (b) and (e), raises the issue of whether, having regard to Articles 6 (1) (c), 6 (a) and 18 (2), the final use of the processed product (the powder for the preparation of edible ices referred to in Article 6 (1) (c) (third option)) is a decisive factor for the release of the security. Finally, a third set of questions, Questions (f) and (g), is concerned with the possible effect for the release of the security of the addition of the binding agent sodium caseinate to the powder for the preparation of edible ices referred to in Article 6 (1) (c) (third option).

Questions (c) and (d)

11. The national court takes the view that if Article 6 (a) applies to all the products enumerated in Article 6 (1) (c) and not only to fine bakers' wares falling within heading 19.08 of the Common Customs Tariff, further processing of the powder for the preparation of edible ices into products other than ice-cream must give rise to the forfeiture of the security. That line of reasoning cannot be accepted in so far as the range of products referred to in Article 6 (a) does not in itself predetermine the extent of the duties imposed on the processing undertaking in its dealings with the purchasers of the processed product. The extent of those duties is defined in the answer to the second set of questions, Questions (a), (b) and (e).

12. The plaintiffs and the party joined in the main proceedings argue that the preamble to Regulation No 1910/73 of 13 July 1973, which inserted Article 6 (a), refers only to products falling within heading 19.08 of the Common Customs Tariff (fine bakers' wares), and that consequently Article 6 (a) does not apply to the powder for the preparation of edible ices referred to in Article 6 (1) (c) of Regulation No 1259/72.

13. The Court is unable to accept that view. As the Bundesanstalt für landwirtschaftliche Marktordnung and the Commission rightly argued, the decisive factor in the interpretation of Article 6 (a) on that point is not the preamble to the regulation which introduced it, which merely sets out the general aims of the regulation, but the wording of the article itself, which makes it clear that Article 6 (a) is not restricted to products falling within heading 19.08 of the Common Customs Tariff but applies to all the products referred to in Article 6 (1) (c).

14. It must therefore be stated in answer to Question (c) that Article 6 (a), which was inserted into Regulation No 1259/72 of the Commission of 16 June 1972 on the disposal of butter at a reduced price to certain Community processing undertakings by Regulation No 1910/73 of the Commission of 13 July 1973, applies to powder for the preparation of edible ices within the meaning of Article 6 (1) (c) (third option) of Regulation No 1259/72.

15. In Question (d), the national court asks whether the further processing of the products referred to in Article 6 (1) (c) permitted by Article 6 (a) may be taken to include the production of any products falling within subheadings 18.06 D and 21.07 F of the Common Customs Tariff or whether it covers only powder for the preparation of edible ices within the meaning of Article 6 (1) (c) (third option).

16. The answer to that question is clear from the purpose of Article 6 (a). Although that provision permits further processing of the products referred to in Article 6 (1) (c) of Regulation No 1259/72 of the Commission provided that the resulting products fall within one of the tariff headings referred to in that article, it cannot fulfil its purpose, which is to prevent the processed products from being diverted from their intended destination, unless only further processing into products referred to in Article 6 (1) (c) is permitted.

17. For this reason it must be stated in answer to Question (d) that Article 6 (a), which was inserted into Regulation No 1259/72 of the Commission of 16 June 1972 on the disposal of butter at a reduced price to certain Community processing undertakings by Regulation No 1910/73 of the Commission of 13 July 1973, permits further processing of the products referred to in Article 6 (1) (c) of Regulation No 1259/72 only if the resulting products are also products referred to in that article.

Questions (a), (b) and (e)

18. The second group of questions asks in substance whether the national intervention agency is required to release the security if, before it does so, it is found that although the butter was processed into powder for the preparation of edible ices within the meaning of Article 6 (1) (c) (third option) of Regulation No 1259/72 as amended by Regulation No 2161/72, the powder, instead of being used for the preparation of edible ices, was separated into products falling within headings of the Common Customs Tariff other than those specified in the regulations.

19. In that regard it must be borne in mind that under the terms of Article 6 (a), further processing of the products referred to in Article 6 (1) (c) is allowed only where such products fall within one of the headings referred to in that Article. Within the scheme of the regulations as a whole, Article 6 (a) is a supplement to Article 6. That is confirmed by the fact that Regulation No 232/75 of the Commission of 30 January 1975 on the sale of butter at reduced prices for use in the manufacture of pastry products and ice cream (Official Journal 1975, L 24, p. 45) includes a provision corresponding to Article 6 (a) as a distinct paragraph within Article 6 itself.

20. Furthermore, by permitting further processing while limiting the products into which processing is permitted, Article 6 (a) is wholly in accordance with the aims pursued by the scheme of the regulation.

21. The Commission's purpose in adopting Regulation No 1259/72 was to reduce butter surpluses by selling butter by tender at a reduced price to certain processing undertakings in the Community. Those undertakings are to give an undertaking first to process the butter (the raw material) into concentrated butter (the intermediate product) and then to process the concentrated butter into one of three specified products (processed products) within 120 days.

22. In the case of powder for the preparation of edible ices, which is referred to in Article 6 (1) (c) (third option), that means that apart from being reprocessed into one of the other two processed products, they may only be used for the preparation of edible ices.

23. Consequently, where it is established, before the security has been released, that the powder for the preparation of edible ices obtained by processing the butter in accordance with Article 6 (1) (c) (third option) has not ultimately been used for the preparation of edible ices nor been reprocessed into one of the other processed products, the national intervention agency must declare the security forfeit.

24. For those reasons it must be stated in answer to Questions (a), (b) and (e) that where the security has not yet been released the national intervention agency must declare it forfeit if it is found that although powder for the preparation of edible ices was produced from the butter as provided by Article 6 (1) (c) (third option) of Regulation No 1259/72 of the Commission of 16 June 1972 on the disposal of butter at a reduced price to certain Community processing undertakings as amended by Regulation No 2161/72 of the Commission of 10 October 1972, the powder was not used for the preparation of edible ices but was separated into products falling within headings of the Common Customs Tariff other than those mentioned in the relevant provisions.

Questions (g) and (f)

25. The third group of questions concerns whether the addition of the binding agent sodium caseinate to the powder for the preparation of edible ices referred to in Article 6 (1) (c) (third option) affects the release of the security.

26. All the parties to the main proceedings agree that the application of Article 6 (1) (c) does not depend on the possibility of selling the processed product in the various Member States and that it is sufficient if its use is permitted in at least one Member State.

27. As the Court stated in its judgment of 14 January 1982 (Case 64/81 Corman v Hauptzollamt Gronau [1982] ECR 13), the requirements regarding the characteristics which the processed products must have ‘are based on the provisions of the Common Customs Tariff read in conjunction with Regulation No 1259/72, that is to say, on provisions of Community law which do not refer to legal systems of the Member States in determining their meaning and scope.’ In consequence legislation of a Member State regulating the quality of foodstuffs cannot affect the release of the security where the processed products for which the security was furnished satisfy the requirements contained in Article 6 (1) (c) of Regulation No 1259/72.

28. It must therefore be stated in answer to Question (f) that the addition of the binding agent known as sodium caseinate to powder for the preparation of edible ices does not adversely affect the right to release of the security where the conditions laid down by Article 6 (1) (c) of Regulation No 1259/72 of the Commission of 16 June 1972, on the disposal of butter at a reduced price to certain Community processing undertakings, are satisfied within the prescribed period.

29. The answer given to Question (f) removes the purpose of Question (g).

Costs

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

On those grounds, THE COURT (First Chamber), in answer to the questions referred to it by the Hessischer Verwaltungsgerichtshof by orders of 30 May 1983, hereby rules:

(1) Article 6 (a), which was inserted into Regulation (EEC) No 1259/72 of the Commission of 16 June 1972 on the disposal of butter at a reduced price to certain Community processing undertakings by Regulation (EEC) No 1910/73 of the Commission of 13 July 1973, applies to powder for the preparation of edible ices within the meaning of Article 6 (1) (c) (third option) of Regulation No 1259/72.

(2) Article 6 (a), which was inserted into Regulation (EEC) No 1259/72 of the Commission of 16 June 1972 on the disposal of butter at a reduced price to certain Community processing undertakings by Regulation (EEC) No 1910/73 of the Commission of 13 July 1973, permits further processing of the products referred to in Article 6 (1) (c) of Regulation No 1259/72 only if the resulting products are also products referred to in that article.

(3) Where the security has not yet been released the national intervention agency must declare it forfeit if it is found that although powder for the preparation of edible ices was produced from the butter as provided by Article 6 (1) (c) (third option) of Regulation (EEC) No 1259/72 of the Commission of 16 June 1972 on the disposal of butter at a reduced price to certain Community processing undertakings as amended by Regulation (EEC) No 2161/72 of the Commission of 10 October 1972, the powder was not used for the preparation of edible ices but was separated into products falling within headings of the Common Customs Tariff other than those mentioned in the relevant provisions.

(4) The addition of the binding agent known as sodium caseinate to powder for the preparation of edible ices does not adversely affect the right to release of the security where the conditions laid down by Article 6 (1) (c) of Regulation (EEC) No 1259/72 of the Commission of 16 June 1972, on the disposal of butter at a reduced price to certain Community processing undertakings, are satisfied withinthe prescribed period.

1 Language of the Case: German.