Flashback on ECJ Cases C-62/93 (BP Soupergaz) – Right to deduct cannot be curtailed without Article 27 authorisation

• BP Soupergaz Anonimos Etairia Geniki Emporiki-Viomichaniki kai Antiprossopeion (“Supergas”) was a company that marketed petroleum and related products in Greece. [app.livv.eu]
• For the accounting period 1 January to 31 December 1987, Supergas submitted VAT returns showing a total turnover of DR 2,012,096,255, of which DR 1,760,906,349 (87%) consisted of sales of petroleum products that, under Article 37(4) of Greek Law No 1642/1986, did not give rise to a right to deduct input VAT; the remaining 13% related to transactions that did. [app.livv.eu]
• During the same period Supergas paid DR 14,336,654 in input VAT. It initially deducted only DR 1,863,765 (13%), then on 31 December 1990 partially revoked its returns on grounds of excusable error, claiming deduction of the full DR 14,336,654 and a refund of DR 12,472,889, which it considered had been wrongly levied. [app.livv.eu]
• The Greek system taxed imported finished petroleum products once only, at the first marketing stage, on a “basic price” fixed by the administration, and denied the right to deduct input VAT on downstream sales — arrangements adopted without an authorisation obtained under Article 27 of the Sixth Directive. [taxlawapp.eu]
• The Head of the State Finance Service rejected the claim by Decision No 46645 of 28 January 1991. Supergas brought an action for annulment and refund before the Dioikitiko Protodikeio Athinas (Administrative Court of First Instance, Athens). [app.livv.eu]
• By judgment of 7 April 1992 (received at the Court on 11 March 1993), that court referred a number of questions for a preliminary ruling under Article 177 of the EEC Treaty on the interpretation of Articles 11, 17 and 27 of the Sixth Council Directive (77/388/EEC) of 17 May 1977. [app.livv.eu]

Articles in the Sixth VAT Directive

Article 27 of the Sixth Council Directive (77/388/EEC) is the derogation provision — it sets out the procedure by which a Member State may be authorised to introduce special measures derogating from the Directive, either to simplify VAT collection or to prevent certain types of tax evasion or avoidance.

The referring court asked, in substance:

1. Whether Articles 2, 11 and 17 of the Sixth Directive preclude national rules that subject the importation of finished petroleum products to VAT calculated once only, on a basic price fixed at the first marketing stage, and deny deduction of input VAT at later stages, where no derogation has been authorised under Article 27. [taxlawapp.eu]
2. Whether the provisions of Article 11A(1) and B(1) and (2) and Article 17(1) and (2) are sufficiently precise and unconditional to be relied upon directly by individuals before national courts. [eurlexsearch.com]
3. Whether the Sixth Directive precludes a general exemption from VAT for all services relating to the transport and storage of imported petroleum products. [eurlexsearch.com]
4. Whether, and on what conditions, amounts of VAT levied in breach of the directive must be refunded with retroactive effect. [eurlexsearch.com]

Decision

The Court holds that Articles 2, 11 and 17 of the Sixth Directive must be interpreted as precluding national rules which, without an authorisation obtained under Article 27, make the importation of finished petroleum products subject to VAT calculated on a basic price fixed once only at the first marketing stage. It rules that the provisions of Article 11A(1) and B(1) and (2) and Article 17(1) and (2), which specify the conditions giving rise to the right to deduct and its extent and leave the Member States no discretion, confer rights on individuals which they may invoke before a national court. The Court further holds that the directive, in particular Articles 13 to 17, precludes a general exemption for all transport and storage services relating to imported petroleum products; the exemption under Article 14(1)(i), read with Article 11B(3)(b), applies only to transport costs up to the first place of destination. Finally, it confirms that the right to a refund of charges levied in breach of Community law is the consequence and complement of those directly effective rights, subject to national procedural rules that respect equivalence and effectiveness. [taxlawapp.eu] [eurlexsearch.com] [eurlexsearch.com] [eurlexsearch.com]

Argumentation (Key Points)

• The fundamental principle underlying the VAT system, flowing from Article 2 of the First and Sixth Directives, is that VAT applies to each production or distribution transaction after deduction of the VAT borne on inputs. [eurlexsearch.com]
• Article 11 aims to ensure that VAT is applied at each marketing stage on the price or value of goods at that stage; it therefore precludes a system fixing the tax once only on the price at the first stage. [eurlexsearch.com]
• The right of deduction in Article 17 et seq. is an integral part of the VAT scheme that cannot in principle be limited, must be exercised immediately for all input taxes, and must apply uniformly across Member States — so derogations are permitted only in the cases expressly provided for in the directive. [eurlexsearch.com]
• Because Article 11A(1) and B(1)–(2) and Article 17(1)–(2) are precise and unconditional and leave no discretion to Member States, they satisfy the conditions for direct effect. [eurlexsearch.com]
• Exemptions must be construed strictly: a blanket exemption for transport and storage exceeds the narrow exemption in Article 14(1)(i) and would improperly deprive traders of deduction rights on later-stage services. [eurlexsearch.com]
• Any departure from these rules required a properly obtained Article 27 derogation, which Greece did not have. [taxlawapp.eu]

Source

• Judgment – CELEX 61993CJ0062 (EUR-Lex) [eur-lex.europa.eu]
• Full judgment PDF (EUR-Lex) [eur-lex.europa.eu]
• Advocate General Jacobs delivered his Opinion on 9 March 1995 — Opinion text: Not available in the public sources consulted. [eur-lex.europa.eu]
• Sixth Council Directive 77/388/EEC of 17 May 1977 [legislation.gov.uk]

Similar ECJ Cases

• C-342/87 (Genius Holding) – right to deduct limited to tax actually due; scope of the deduction right. [eur-lex.europa.eu]
• 8/81 (Becker) – direct effect of sufficiently precise and unconditional provisions of the Sixth Directive.
• 268/83 (Rompelman) – deduction as an integral part of the VAT scheme and principle of neutrality.
• C-97/90 (Lennartz) – immediate exercise of the right to deduct.
• 45/76 (Comet) – national procedural autonomy and the effectiveness of refunds of charges levied contrary to EU law.

Reference to the Case in the Other EU Member States

BP Soupergaz is a frequently cited authority (90 inbound citations recorded in case-law databases) on the direct effect of the deduction provisions and the strict limits on national derogations absent an Article 27 authorisation. No specific individual national references were identified in the public sources consulted. [app.lexploria.com]