Recently, the European Court of Justice (ECJ) ruled in a case involving products subject to payment of excise duty. Excise duties are (indirect) taxes levied on the consumption or the use of certain products such as (manufactured) tobacco products, alcoholic beverages and mineral oils. The EU excise legislation is laid down in Directives, meaning that all Member States have the obligation to transpose the EU provisions into their national legislation. The initial EU excise legislation dates back to 1993,1 as a result of the establishment of the Internal Market and includes general provisions, in particular concerning the production, storage and movement between the various Member States. The prejudicial questions put forward by the referring Court in the underlying case — inter alia — related to whether or not the product in question needed to be accompanied by an administrative accompanying document (AAD) during transportation.
Per the EU excise legislation, the “main rule” for transportation of excise products for which excise duties have not been paid is that these are accompanied by an AAD, drawn up by the consignor.2 There are some exceptions to the rule — inter alia — for excise products that are coming from third countries and are placed under a customs suspension procedure.3
The case: An importer arranged for the importation of raw tobacco into the EU. The product was imported under a customs suspension regime, i.e., inward processing relief, suspension system, for which the importer obtained a customs authorization from the competent authorities. It is important to point out that raw tobacco is not subject to excise duty payment. The raw tobacco was subsequently processed into cut tobacco, the latter being subject to excise duty. Per the customs license, the importer was entitled to use delivery notes to accompany consignments of cut tobacco to other EU Member States. The recipient certified receipt of said delivery notes. At a certain moment, the importer was assessed by the competent customs authorities (Customs) as — according to Customs — the importer had not produced an AAD, certified by the competent authorities in the Member State of receipt. As a result, Customs took the view that the importer had failed to demonstrate delivery/receipt of the goods in the tax warehouse of the recipient. Hence, Customs sought excise duty payment from the importer. The complaints of the importer were rejected by Customs after which the importer challenged the decisions in an action before the competent Court.
The referring Court decided to stay the national proceedings and referred the following questions to the ECJ for a preliminary ruling:
“Must the first indent of the first subparagraph of Article 5(2) of [Directive 92/12] be interpreted as meaning that non-Community goods subject to excise duty which have been placed under an inward processing procedure within the terms of Article 84(1)(a) of [the Community Customs Code] are to be deemed to be subject to dutysuspension arrangements even if they are produced, under an inward processing procedure, from goods which are not subject to excise duty only after the importation of those goods and therefore, in accordance with the 15th recital in the preamble to Directive 92/12 …, when they are being moved there is no need for the accompanying document referred to in Article 18(1) of Directive 92/12 … to be used?
“If the first question is to be answered in the negative: must Article 15(4) of Directive 92/12 … be interpreted as meaning that proof that the consignee has taken delivery of the goods may also be provided otherwise than by means of the accompanying document referred to in Article 18 of Directive 92/12 …?”
Based on the fact that the Community Customs Code4 lays down obligations with regard to the supervision and monitoring of the customs suspension regime (and the fact that supervision concerning movement is equivalent to that which results from the requirement of an AAD), the ECJ is of the opinion that the first indent of article 5(2) of Directive 92/12/EEC not only applies to products coming from third countries which are subject to excise duty but also to products such as those at issue in the main proceedings. As a result, the ECJ concludes that there is no need to determine whether such products must also be regarded as products going to third countries, within the meaning of article 5(2) of Directive 92/12/EEC.
In conclusion, products subject to excise duty (e.g., manufactured tobacco) that are manufactured from products not subject to excise duty (e.g., raw tobacco) and imported into the EU under the inward processing relief scheme are to be deemed to be subject to duty suspension arrangements, within the meaning of that provision, even though they have become products subject to excise duty only by virtue of having been processed within EU territory. This means that they can move between Member States without Customs being entitled to insist on production of AAD’s or commercial documents. In view of the answer to question 1, the ECJ felt no need to address the second question.
As a side note: At the moment this case was pending (2003), Directive 92/12/EEC was applicable. Due to various developments, a new Council Directive entered into force in 20095 which applies across the EU effective April 1, 2010. The “new” Directive also provides a legal framework for the use of the Excise Movement Control System (EMCS), which is applicable from 1 April 2010. EMCS is a computerized system for monitoring movements of excise goods under suspension of excise duty within the EU, i.e., for which no excise duties have yet been paid. EMCS was developed as a result of the high levels of fraud in the Member States and the corresponding loss of national revenues, especially in the field of tobacco and alcohol.
Since April 1, 2010, EMCS replaces “paper” documents with electronic messages (e-AD) from the consignor to the consignee via Member State administrations. The period between 1 April and 31 December 2010 is considered a transition phase but as of January 1, 2011, EMCS becomes compulsory for all relevant movements of excise goods. It is noted that the transport must (still) be accompanied by a printed version of the e-AD or any other commercial document mentioning, in a clearly identifiable manner, the unique administrative reference code assigned by EMCS to the movement.