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Flashback on ECJ Cases – C-250/11 (Lietuvos geležinkeliai) – Exemption for the definitive importation of certain goods does not apply to locomotives

On July 19, 2012, the ECJ issued its decision in the case C-250/11 (Lietuvos geležinkeliai).

Context: Relief from customs duties and VAT exemptions on imports of goods — Fuel contained in the standard tanks of land motor vehicles — Notion of ‘motorised road vehicle’ — Locomotives — Road transport and transport by rail — Principle of equal treatment — Principle of neutrality


Article in the EU VAT Directive

Article 143(1)(b) and (c) of  the EU VAT Directive 2006/112/EC.

Article 143
1. Member States shall exempt the following transactions:
(b) the final importation of goods governed by Council Directives 69/169/EEC5, 83/181/EEC6 and 2006/79/EC7;
(c) the final importation of goods, in free circulation from a third territory forming part of the Community customs territory, which would be entitled to exemption under point (b) if they had been imported within the meaning of the first paragraph of Article 30;


Facts

  • From 1 January 2005 to 30 April 2010, LG purchased diesel fuel regularly at the train stations in Nesterov and Sovetsk in the territory of the enclave of Kaliningrad (Russia) as fuel for its locomotives. The diesel fuel was put into the standard locomotive fuel tanks then imported into the customs territory of the European Union in those tanks, without being declared to the customs office.
  • The Lithuanian authorities had indicated to LG that it enjoyed an import exemption for fuel imported in the tanks of locomotives originating from a non-member country. The Muitinės departamentas prie Lietuvos Respublikos finansų ministerijos (Customs Department, Ministry of Finance of the Republic of Lithuania) had indicated, in a letter of 26 February 2002, that it was not necessary to declare separately the fuel present in the tanks of the locomotives crossing the border of the Republic of Lithuania, as that fuel was not subject to excise duties or import VAT.
  • On 8 June 2007, LG submitted a request to the Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos (National Tax Directorate, Ministry of Finance of the Republic of Lithuania) asking for clarification as to whether locomotives were to be equated with motorised road vehicles under the Law on VAT. In its reply of 27 June 2007, that office confirmed that locomotives were equated with those vehicles.
  • In a letter of 14 November 2008, addressed to the Republic of Lithuania, the European Commission stated that it took the view that locomotives cannot be equated with motorised road vehicles and that the relief and exemptions provided for in Article 112 of Regulation No 918/83 and Article 82 of Directive 83/181 therefore did not apply to imported fuel contained in the standard tanks of locomotives.
  • By letter of 20 November 2008, the Ministry of Finance informed LG that the import VAT exemptions provided for by the Law on VAT were not applicable to locomotives. LG therefore put a stop to the practice of filling the tanks of its locomotives on Russian territory. By letter of 27 November 2009, the Ministry of Finance informed LG that it would proceed with the recovery of taxes owing on fuel transported in the standard tanks of locomotives.
  • The Vilniaus teritorinė muitinė subsequently conducted a tax inspection of the period from 1 January 2005 to 30 April 2010, in respect of fuel imported into the customs territory of the European Union in standard fuel tanks of locomotives and, on 16 December 2010, notified LG, by Decision No OVM320138M, of an assessment of LTL 28 860 895 in excise duties, import VAT, overdue interest and fine for non-payment of excise duty and import VAT.
  • On 6 January 2011 LG brought a complaint against that decision before the Customs Department of the Ministry of Finance. As that department did not rule on the complaint within the time-limits prescribed by the applicable legislation, on 3 March 2011 LG brought an action before the referring court to have that decision annulled.
  • That court observes that the title of Regulation No 918/83 containing the relevant provisions refers merely to ‘land motor vehicles’ and that locomotives come within that category. It doubts that it is appropriate and legally well founded to apply a different fiscal scheme to different categories of land vehicles. In its view, it should be considered whether a different fiscal approach to railway and automotive road vehicles can be justified by any objective criteria, since all the other factors at issue, namely the vehicle’s purpose (in the present case, commercial) and the way in which the fuel is imported (in standard tanks) and used (for vehicle propulsion) are the same.

Questions

1.    Should the exemption from import duties laid down in Article 112(1)(a) of Regulation No 918/83 1 and Article 107(1)(a) of Regulation No 1186/2009 2 be understood as applying to motor vehicles [motorinės transporto priemonės] that are locomotives?
2.    Should the exemption from value added tax laid down in Article 82(1)(a) of Directive 83/181/EEC 3 and Article 84(1)(a) of Directive 2009/132/EC 4 be understood as applying to motor vehicles [motorinės transporto priemonės] that are locomotives?
3.    If the answer to the second question is in the affirmative, do legal rules such as those laid down in Article 82(1)(a) of Directive 83/181/EEC and Article 84(1)(a) of Directive 2009/132/EC have to be interpreted as prohibiting a Member State from restricting the cases of exemption from import VAT for fuel by providing that such an exemption is applicable exclusively to fuel that is admitted into the territory of the European Union in the standard tanks of automotive vehicles and is necessary for the operation of those vehicles?

AG Opinion

None


Decision

Article 112(1)(a) of Council Regulation (EEC) No 918/83 of 28 March 1983 setting up a Community system of reliefs from customs duty, as amended by Council Regulation (EEC) No 1315/88 of 3 May 1988, Article 107(1)(a) of Council Regulation (EC) No 1186/2009 of 16 November 2009 setting up a Community system of reliefs from customs duty, Article 82(1)(a) of Council Directive 83/181/EEC of 28 March 1983 determining the scope of Article 14(1)(d) of Directive 77/388/EEC as regards exemption from value added tax on the final importation of certain goods, as amended by Council Directive 88/331/EEC of 13 June 1988 and Article 84(1)(a) of Council Directive 2009/132/EC of 19 October 2009 determining the scope of Article 143(b) and (c) of Directive 2006/112/EC as regards exemption from value added tax on the final importation of certain goods must be interpreted as meaning that they do not apply to locomotives.


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