Opinion of Advocate General Menggozzi in case C‑108/17 (Enteco Baltic), delivered on 22 March 2018
Facts:
Enteco Baltic is a company established in Lithuania. It is active in the wholesale trade in fuel.
Enteco Baltic imported into Lithuania fuels from Belarus. Those fuels were placed under the arrangement known as ‘customs procedure 42’, which permits their release for free circulation without being subject to import VAT. In the import declarations, the VAT identification number of a purchaser located in another Member State was mentioned, to which it intended to supply the goods. It stored those goods in warehouses belonging to other Lithuanian companies for goods subject to excise duties.
Enteco Baltic sold those fuels to companies established in Poland, Slovakia and Hungary on the basis of written contracts and individual orders. Those contracts provided for ‘ex-works’ supply. Accordingly, Enteco Baltic was only required to hand the fuels over to the purchasers in Lithuania and those purchasers were responsible for the continuation of transport to the Member State of destination.
The purchasers communicated their specific orders to Enteco Baltic by electronic mail, providing, in particular, the contact details of the representatives who would pick up the goods ordered and information relating to the tax warehouses to which those goods were to be transported. VAT invoices issued by Enteco Baltic were usually sent to the purchasers by electronic mail.
For the purposes of their transport, the goods were the subject of electronic transport documents for goods subject to excise duties and CMR consignment notes. The latter were completed by employees with responsibility at the dispatching tax warehouse and specified, inter alia, the place of dispatch of the goods (that is to say the dispatching tax warehouse), as well as the purchaser and place of receipt of those goods (that is to say the receiving tax warehouse).
After the supply of the goods to the receiving tax warehouses, Enteco Baltic received an e-ROR confirmation of supply and closure of the electronic transport document. Ordinarily, it also received CMR consignment notes confirming receipt of the goods by the receiving tax warehouses.
Enteco Baltic sometimes sold goods to taxable persons other than those whose identification numbers were specified on the import declarations. Information relating to those taxable persons from other Member States, including their VAT identification number, was always provided to the Tax Inspectorate in the monthly reports on the supply of goods to other Member States.
The Lithuanian customs authorities found irregularities in the VAT identification numbers. It corrected them. Not long after that, the Lithuanian tax authorities received information from the Polish, Slovak and Hungarian tax authorities concerning possible fraud in the application of ‘customs procedure 42’. In particular, those authorities stated that they could not certify that the fuels at issue had been received by the purchasers and observed that those purchasers had not declared VAT during the period concerned.
In view of that information, the tax authorities carried out a tax inspection with Enteco Baltic. It found that Enteco Baltic had provided sufficient evidence to show that the goods had left the country and that the right to dispose of those goods as owner had actually been transferred to the purchasers. According to the tax authorities, it had not been established that Enteco Baltic acted negligently or imprudently in the course of the transactions at issue.
However, the Lithuanian customs authorities also performed an audit (partly on the same period and transactions), and they concluded that Enteco Baltic had not supplied fuels to the taxable persons specified in the import declarations or had failed to establish that the fuels had been transported and that the right to dispose of them as owner had been transferred to the persons specified in the VAT invoices.
The Lithuanian court asked questions to the European Court of Justice regarding the VAT exemption that applies when goods are supplied to a customer in another Member State immediately after being imported. More specifically:
(1) Can a tax authority refuse the VAT exemption if at the time of importation the goods were planned to be supplied to one VAT payer and therefore its VAT identification number was specified in the import declaration, but later, after a change in circumstances, the goods were transported to another taxable person (VAT payer) and the public authority was provided with full information about the identity of the actual purchaser?
(2) If a taxable person has evidence of the supplies in the form of documents that have not been disproved (e-AD, consignment notes and e-ROR confirmations), and which confirm the transport of the goods from a tax warehouse in the territory of one Member State to a tax warehouse in another Member State, is that regarded as sufficient proof of transportation of the goods to another Member State?
(3) Can the VAT exemption still be applied if the right of disposal was transferred to the purchaser of the goods not directly, but via the persons specified by it (transport undertakings/tax warehouses)?
(4) Does an administrative practice conflict with the principle of neutrality of VAT and of the protection of legitimate expectations where under that practice the interpretation differs as to what is to be regarded as a transfer of the right of disposal, and as to what evidence must be submitted to substantiate such a transfer?
(5) Does the scope of the principle of good faith in relation to the levying of VAT also encompass the right of persons to exemption from import VAT in cases such as that in the main proceedings, that is to say, where the customs office denies the right of a taxable person to exemption from import VAT on the basis that the conditions for further supply of goods within the European Union were not complied with?
(6) Is a Member States allowed to continue an administrative practice under which the assumption that (i) the right of disposal was not transferred to a specific contractual partner and (ii) that the taxpayer knew or could have known about possible VAT fraud committed by the contractual partner is based on the fact that the undertaking communicated with the contractual partners by electronic means of communication and that it was established when the investigation was carried out by a tax authority that the contractual partners did not operate at the addresses specified and did not declare the VAT on the transactions with the taxable person?
(7) Although the duty to substantiate the right to a tax exemption falls on the taxpayer, does this not, however, mean that the competent public authority deciding the issue of transfer of the right of disposal has no obligation to collect information accessible only to public authorities?
Conclusion:
(1) Member State should not be allowed to refuse the exemption merely on the basis that, at the time of importation, the goods were intended to be supplied to a taxable person in another Member State, which explains why the value added tax (VAT) identification number of that taxable person is specified in the import declaration, although, as the result of a subsequent change of circumstances, the goods were supplied to another taxable person (also liable for payment of VAT) and the authorities of the first Member State were provided with full information relating to the identity of the actual purchaser.
(2) The documents, such as the electronic administrative document (‘the e-AD’) and the CMR consignment note, may be regarded as evidence establishing that, at the time of importation, the goods imported are intended to be dispatched or transported to another Member State. Reports of receipt of e-ADs and ‘e-ROR’ confirmation letters may be regarded as evidence establishing that the imported goods, which were the subject of the intra-Community supply, left the territory of the Member State of importation and supply and were dispatched to the Member State of destination.
(3) Member State should not be allowed to refuse the exemption from import VAT where the right to dispose, as owner, of the goods which have been imported and supplied has not been directly transferred to the purchaser, provided that that right has indeed been transferred to that taxable person and not to other persons, which it is for the referring court to ascertain.
(4) The principle of legal certainty must be interpreted as meaning that it prevents the customs authority of a Member State from refusing to grant entitlement to exemption from import VAT to a taxable person, acting in good faith and without its having been established that he knew or ought to have known that he was participating in tax evasion, on the ground that one of the substantive conditions for the VAT exemption for an intra-Community supply following importation is no longer fulfilled, even though that condition had already been regarded as having been fulfilled by the competent authority of the same Member State following an inspection of the evidence and documents provided by the taxable person.
It is for the referring court to ascertain whether the facts of the case in the main proceedings make it possible to find that all those circumstances apply and all those conditions are fulfilled, it being understood that the mere fact that the taxable person used electronic means to communicate with the other parties to the contract cannot give rise to an assumption of negligence or bad faith on the part of that taxable person.
(5) The taxable person who relies on the exemption from import VAT should establish that the substantive conditions for that exemption are fulfilled and, that taxable person cannot require that the competent authorities of the Member State of importation, when examining whether the right to dispose of the goods supplied as owner was transferred to the purchaser, collect from other taxable persons information accessible only to the public authorities.
Source: Curia
