Flashback on ECJ Cases C-491/04 (Dollond & Aitchison) – “Transaction value” includes the amount paid for both services and goods

On February 23, 2006, the ECJ issued its decision in the case C-491/04 (Dollond & Aitchison).

Context: Community Customs Code – Customs value – Customs import duties – Delivery of goods by a company established in Jersey and supplies of services effected in the United Kingdom

Article in the EU VAT Directive

Article 11(B)(1) of the Sixth VAT Directive (Article 85 of the EU VAT Directive 2006/112/EC).

Article 85 (Taxable amount)
In respect of the importation of goods, the taxable amount shall be the value for customs purposes, determined in accordance with the Community provisions in force.

Customs code

Article 29 of the Customs Code

1. The customs value of imported goods shall be the transaction value, that is, the price actually paid or payable for the goods when sold for export to the customs territory of the Community, adjusted, where necessary, in accordance with Articles 32 and 33 … .

…

3. (a) The price actually paid or payable is the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods and includes all payments made or to be made as a condition of sale of the imported goods by the buyer to the seller or by the buyer to a third party to satisfy an obligation of the seller. …’

Where the customs value cannot be determined in accordance with Article 29 of the Customs Code, reference must be made to Article 30(2) thereof, which states:

‘The customs value as determined under this article shall be:

(a) the transaction value of identical goods sold for export to the Community and exported at or about the same time as the goods being valued;
(b) the transaction value of similar goods sold for export to the Community and exported at or about the same time as the goods being valued;
(c) the value based on the unit price at which the imported goods for identical or similar imported goods are sold within the Community in the greatest aggregate quantity to persons not related to the sellers;
(d) the computed value, consisting of the sum of:
- the cost or value of materials and fabrication or other processing employed in producing the imported goods,
- an amount for profit and general expenses equal to that usually reflected in sales of goods of the same class or kind as the goods being valued which are made by producers in the country of exportation for export to the Community,
- the cost or value of the items referred to in Article 32(1)(e) …’

Facts

D & A is a firm of opticians with branches throughout the United Kingdom. Until 1998, D & A operated a scheme under which customers collected their disposable contact lenses from a branch every three months. They were entitled to receive certain professional services and were required to undergo an annual eye check. The tax authorities treated that scheme as involving two separate elements: a supply of goods, taxable at the standard rate of value added tax (‘VAT’), and a supply of services, exempt from that tax.
In 1998, the system changed so that a company not connected with the appellant in the main proceedings dispatched the lenses, solutions and soaking cases from Scotland. D & A did not change its method of accounting for VAT even though, following a reversal of precedent in the case of Leightons Ltd v CEC, the tax authorities had concluded that supplies of contact lenses are a mixed supply of goods and services covering all types of professional services, including measuring and fitting.
With effect from July 1999, the company transferred its warehousing operation to Jersey to take advantage of cheaper postal services.
Dollond & Aitchison Lenses Direct Ltd (‘DALD’), a company in the same group, incorporated under Jersey law, dispensed disposable contact lenses by post in the form of a subscription from Jersey to the United Kingdom between 1 July 1999 and 30 June 2001. Subscribers paid a fixed monthly amount, for which they received a periodic supply of disposable lenses together with the solutions and soaking cases necessary for their care. In addition, the price covered an initial contact lens examination or consultation, a contact lens check at least once a year and any other aftercare relating to the use of the lenses.
The Commissioners held, by decision of 18 October 1999, that when DALD dispensed contact lenses from Jersey to customers in the United Kingdom, it made single supplies of goods, rather than supplies of goods and services. By a second decision of 6 September 2001, they held that the true value of a consignment included all amounts payable as a condition of the sale, that is to say, its full price.

Questions

(1) Is that part of the payment which is made by a customer to [DALD] for the supply of specified services by [D & A] or by its franchisees to be included in the total payment for the specified goods so as to be part of the price paid or payable for the specified goods within the meaning of Article 29 of [the Customs Code] in circumstances where the customer is a private consumer and importer on whose behalf [DALD] accounts for VAT on importation?

The specified goods are:

(i) contact lenses
(ii) cleaning solutions
(iii) soaking cases.

The specified services are:

(iv) a contact lens examination
(v) a contact lens consultation
(vi) any on-going aftercare required by a customer.

(2) If the answer to [Question] 1 above is No, may the amount of the payment for the specified goods nonetheless be calculated under Article 29 or is it necessary to make such calculation under Article 30 of [the Customs Code]?

(3) In view of the fact that the Channel Islands are part of the customs territory of the Community but are not part of the VAT territory for the purposes of the [Sixth Directive], does any of the guidance set out in Case C-349/96 Card Protection Plan v Commissioners of Customs and Excise [[1999] ECR I-973] apply for the purposes of determining which part or parts of the transaction comprising the provision of specified services and specified goods fall to be valued for the purposes of applying the [Common] Customs Tariff of the European Communities?

AG Opinion

None

Decision

1. Article 29 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code must be interpreted as meaning that, in circumstances such as those of the main proceedings, payment for the supply of specified services, such as examination, consultation or aftercare required in connection with contact lenses, and for specified goods, consisting of those lenses, the cleaning solutions and the soaking cases, constitutes as a whole the ‘transaction value’ within the meaning of Article 29 of the Customs Code and is, therefore, dutiable.

2. The principles laid down in the CCP judgment (Case C-349/96) of 25 February 1999 cannot be used directly to determine the elements of the transaction to be taken into account for the purposes of applying Article 29 of the Customs Code.

Summary

Art. 29 of the Community Customs Code states that the “transaction value” includes the amount paid for both services and goods. In a specific case related to contact lenses, the payment for investigation, consultation, aftercare, lenses, cleaning solutions, and lens cases are all taxable. The CPP (C-349/96) judgment cannot be used to determine which elements of the transaction value should be considered.

Source