Flashback on ECJ cases C-455/98 (Salumets and Others) – VAT due on contraband importation into Community customs territory of ethyl alcohol from non-member countries

On June 29, 2000, the ECJ issued its decision in the case C-455/98 (Salumets and Others).

Context: Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Sixth Directive – Tax on importation – Scope – Contraband importation of ethyl alcohol

Article in the EU VAT Directive

Article 2 of thge Sixth VAT Directive (Article 2(1) of the EU VAT Directive 2006/112/EC).

Article 2 (Taxable transactions)
1. The following transactions shall be subject to VAT:
(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;
(b) the intra-Community acquisition of goods for consideration within the territory of a Member State by:
(i) a taxable person acting as such, or a non-taxable legal person, where the vendor is a taxable person acting as such who is not eligible for the exemption for small enterprises provided for in Articles 282 to 292 and who is not covered by Articles 33 or 36;
(ii) in the case of new means of transport, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1), or any other non-taxable person;
(iii) in the case of products subject to excise duty, where the excise duty on the intra-Community acquisition is chargeable, pursuant to Directive 92/12/EEC, within the territory of the Member State, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1);
(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;
(d) the importation of goods.

Facts

It appears from the documents in the case that the defendants in the main proceedings were convicted by the Käräjäoikeus and sentenced to fines and imprisonment for having smuggled into Finland during 1996 and 1997 about 100 000 litres of ethyl alcohol from Estonia. It is common ground that some of the alcohol thus unlawfully imported was already bottled, while the remainder was bottled in Finland, in a former stable, in unhygienic conditions.
The Käräjäoikeus separated from the criminal proceedings the application by the Tullihallitus for Mr Salumets and his accomplices to be ordered, pursuant to the Laki alkoholi- ja alkoholijuomaverosta (Law on tax on alcohol and alcoholic drinks), No 1471/1994, to pay customs duty, VAT, excise duty and alcohol duty which should have been paid by the importers when the goods entered Community territory, amounting to approximately FIM 38 000 000.
The Käräjäoikeus, hearing that application, expressed doubt as to whether the provisions of the Customs Code and the tax directives mentioned in paragraph 1 above apply also to ethyl alcohol imported as contraband.
In particular, that court is uncertain whether the unlawful importation into Finland of ethyl alcohol, which is not intended as such for human consumption and the market for which is much smaller than for other alcoholic drinks because of the system of authorisation governing such imports in Finland, ought not to be treated in the same way as the unlawful supply of narcotic drugs and the importation of counterfeit currency, which, according to the Court’s case-law, are not subject to customs duty or VAT.

Questions

Are the European Community tax directives Council Directive 92/12/EEC of 25 February 1992, Council Directive 92/83/EEC of 19 October 1992 and Council Directive 77/388/EEC of 17 May 1977 and the Customs Code (Council Regulation (EEC) No 2913/92 of 12 October 1992) to be interpreted as meaning that the provisions concerning tax liability and customs debts apply to the smuggling of ethyl alcohol?

AG Opinion

Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages and the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis for assessment, must be interpreted as meaning that the contraband importation into the Community customs territory of ethyl alcohol from non-member countries is subject to customs duties, excise duties and value added tax, in accordance with the provisions in force at the time of the unlawful importation.

Decision

Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages and Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code must be interpreted as meaning that their provisions on liability to tax and tax debts apply also to contraband importation into Community customs territory of ethyl alcohol from non-member countries.

Summary

Source