A (Taxation en commun des petites brasseries) (Excise duty - beer brewed by independent small breweries - Judgment) [2021] EUECJ C-221/20 (28 October 2021)

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(Reference for a preliminary ruling – Taxation – Directive 92/83/EEC – Excise duty – Beer – Article 4(2) – Possibility to apply reduced rates of excise duty to beer brewed by independent small breweries – Treatment as a single independent small brewery or as two or more small breweries – Obligation to transpose)

REQUESTS for a preliminary ruling under Article 267 TFEU from the Korkein hallinto-oikeus (Supreme Administrative Court, Finland), made by decisions of 20 May 2020, received at the Court on 28 May 2020, in the proceedings brought by

composed of I Ziemele (Rapporteur), President of the Sixth Chamber, acting as President of the Seventh Chamber, President of the Chamber, P.G. Xuereb and A. Kumin, Judges,

having regard to the written procedure and further to the hearing on 1 July 2021,

– the Italian Government, by G. Palmieri, acting as Agent, and by A. Maddalo, avvocato dello Stato,

– the European Commission, by C. Perrin and by I. Koskinen and M. Huttunen, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

1 These requests for a preliminary ruling concern the interpretation of Article 4(2), second sentence, of Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages (OJ 1992 L 316, p. 21).

2 The requests have been made in proceedings brought by A Oy (C‑221/20) and B Oy (C‑223/20), companies engaged in brewing activities, concerning the refusal to treat them as an independent small brewery for the purposes of obtaining a reduction on excise duty.

‘1. Member States may apply reduced rates of duty, which may be differentiated in accordance with the annual production of the breweries concerned, to beer brewed by independent small breweries within the following limits:

– the reduced rates shall not be applied to undertakings producing more than 200 000 hl of beer per year,

– the reduced rates, which may fall below the minimum rate, shall not be set more than 50% below the standard national rate of excise duty.

2. For the purposes of the reduced rates the term “independent small brewery” shall mean a brewery which is legally and economically independent of any other brewery, which uses premises situated physically apart from those of any other brewery and does not operate under licence. However, where two or more small breweries cooperate, and their combined annual production does not exceed 200 000 hl, those breweries may be treated as a single independent small brewery.’

4 The seventh recital of Council Directive 92/84/EEC of 19 October 1992 on the approximation of the rates of excise duty on alcohol and alcoholic beverages (OJ 1992 L 316, p. 29), states:

‘Whereas the methods of taxing beer within the Member States vary, and it is possible to permit this variation to continue, in particular by laying down a minimum rate expressed as a charge related both to the original gravity and to the alcoholic content of the product’.

5 Paragraph 9(1) and (3) of the Alkoholi- ja Alkoholijuomaverolaki (1471/1994) (Law on the taxation of alcohol and alcoholic beverages (1471/1994)), in the version applicable until 31 December 2014, provides:

‘If the taxable person can reliably demonstrate that the beer was brewed in an undertaking that is legally and economically independent of other undertakings in the same sector and the volume of beer produced by that undertaking in a calendar year does not exceed 10 000 000 litres, the alcoholic beverage tax payable on the beer is to be reduced:

(1) by 50 per cent in so far as the volume of beer produced by the undertaking in a calendar year does not exceed 200 000 litres;

(2) by 30 per cent in so far as the volume of beer produced by the undertaking in a calendar year exceeds 200 000 litres but does not exceed 3 000 000 litres;

(3) by 20 per cent in so far as the volume of beer produced by the undertaking in a calendar year exceeds 3 000 000 litres but does not exceed 5 500 000 litres;

(4) by 10 percent in so far as the volume of beer produced by the undertaking in a calendar year exceeds 5 500 000 litres but does not exceed 10 000 000 litres.

If two or more undertakings referred to in the first subparagraph cooperate with each other in production or at operational level, this shall not be considered to mean that there is legal or economic dependence between them. Cooperation in production or at the operational level means the supply of raw materials and equipment necessary for the production of beer and the packaging, marketing and distribution of beer. However, the application of this subparagraph is subject to the condition that the total volume of beer produced by the undertakings during the calendar year does not exceed 10 000 000 litres.’

6 Paragraph 9(1) and (3) of the Law on the taxation of alcohol and alcoholic beverages, in the version applicable as of 1 January 2015, provides:

‘If the taxable person can reliably demonstrate that the beer was brewed in an undertaking that is legally and economically independent of other undertakings, is situated physically apart from other breweries and does not carry out production under licence, and the volume of beer produced by that undertaking in a calendar year does not exceed 15 000 000 litres, the alcoholic beverage tax payable on the beer is to be reduced:

(1) by 50 per cent in so far as the volume of beer produced by the brewery in a calendar year does not exceed 500 000 litres;

(2) by 30 per cent in so far as the volume of beer produced by the brewery in a calendar year exceeds 500 000 litres but does not exceed 3 000 000 litres;

(3) by 20 per cent in so far as the volume of beer produced by the brewery in a calendar year exceeds 3 000 000 litres but does not exceed 5 500 000 litres;

(4) by 10 per cent in so far as the volume of beer produced by the brewery in a calendar year exceeds 5 500 000 litres but does not exceed 10 000 000 litres.

If two or more breweries referred to in the first subparagraph cooperate with each other in production or at the operational level, that is not to be taken to mean that there is legal or economic dependence between them. Cooperation in production and at the operational level means the supply of raw materials and equipment necessary for the production of beer as well as the packaging, marketing and distribution of beer. However, the application of this subparagraph is subject to the condition that the total volume of beer produced by the breweries in the calendar year does not exceed 15 000 000 litres.’

The disputes in the main proceedings and the questions referred for a preliminary ruling

7 During 2015 and 2016, Tulli (Customs and Excise Administration, Finland) carried out inspections at the premises of A and B, companies engaged in, inter alia, brewing operations, in respect of the tax on alcohol and alcoholic beverages owed by those companies for the periods from 1 May 2013 to 31 December 2015 (for A) and from 1 January 2013 to 31 December 2014 (for B).

8 While A and B had indicated in their tax returns relating to alcohol and alcoholic beverages the taxable supplies of beer in the product category for which the tax is reduced by 50%, the customs and excise authorities considered that those companies were not entitled to that reduction as they could not be considered legally and economically independent breweries within the meaning of Paragraph 9 of the Law on the taxation of alcohol and alcoholic beverages, in particular because they were both partly owned by a third party who was also their manager. Those authorities also pointed out, with regard to the joint taxation of A and B, that the Finnish legislature had deliberately chosen not to include in Paragraph 9 the possibility of treating two or more small breweries as a single brewery. Accordingly, by adjustment notices issued on 9 December 2016, the tax authorities imposed tax increases and penalties on A and B.

9 As their administrative appeals were unsuccessful, A and B each lodged legal proceedings before the Helsingin hallinto-oikeus (Helsinki Administrative Court, Finland). By decisions of 5 November 2018, that court dismissed those actions, on the ground, first, that A and B were not entitled to the reduced rate of duty provided for in Paragraph 9 of the Law on the taxation of alcohol and alcoholic beverages and, secondly, as regards joint taxation, that the Republic of Finland had not transposed the second sentence of Article 4(2) of Directive 92/83 and was not required to do so.

10 A and B each appealed to the Korkein hallinto-oikeus (Supreme Administrative Court, Finland), the referring court.

11 That court points out that there is not an unequivocal answer to the question whether a Member State which applies reduced rates of excise duty to beer brewed by independent small breweries, within the meaning of Article 4 of Directive 92/83, must also apply the second sentence of Article 4(2) of that directive or whether the application of the latter provision is left to the discretion of the Member State concerned.

12 In those circumstances, the Korkein hallinto-oikeus (Supreme Administrative Court) decided to stay the proceedings and to refer the following questions, which are worded identically in Case C‑221/20 and Case C‑223/20, to the Court of Justice for a preliminary ruling:

‘(1) Is Article 4 of [Directive 92/83] to be interpreted as meaning that a Member State which applies reduced rates of excise duty to beer brewed by independent small breweries pursuant to that provision must also apply the provision on the joint taxation of small breweries contained in the second sentence of Article 4(2) of that directive, or is the application of the latter provision left to the discretion of the Member State concerned?

(2) Does the second sentence of Article 4(2) of [Directive 92/83] have direct effect?’

13 By decision of 14 July 2020, the President of the Court of Justice decided to join Cases C‑221/20 and C‑223/20 for the purposes of the written procedure, the oral procedure and the judgment.

14 By its first question, the national court is asking, in essence, whether the second sentence of Article 4(2) of Directive 92/83 is to be interpreted as meaning that that provision must be implemented by a Member State which applies reduced rates of excise duty to beer produced in independent small breweries in accordance with Article 4(1) and the first sentence of Article 4(2) thereof.

15 As a preliminary point, it must be observed that, without formally contesting the admissibility of the present requests for a preliminary ruling, the applicants in the main proceedings, in their observations, argued in substance that, contrary to the findings in the notices of adjustment of 9 December 2016, referred to in paragraph 8 of the present judgment, it did not follow from the legislative works leading to the adoption of the provisions set out in paragraphs 5 and 6 of the present judgment that the second sentence of Article 4(2) of Directive 92/83 has not been transposed into Finnish law. Similarly, in its written observations, the European Commission questioned whether those provisions, in view of their wording, could constitute a transposition of that Article 4(2), second sentence.

16 It must be recalled that, according to settled case-law, it is not for the Court to rule on the interpretation of provisions of national law, as such an interpretation falls within the exclusive jurisdiction of the national courts (see, to that effect, judgment of 5 June 2018, Grupo Norte Facility, C‑574/16, EU:C:2018:390, paragraph 32 and the case-law cited).

17 Thus, the Court has no jurisdiction to rule on the question whether the provisions of the third paragraph of Paragraph 9 of the Law on the taxation of alcohol and alcoholic beverages, in the version applicable before 1 January 2015 and in the version applicable from that date, constitute a transposition of the second sentence of Article 4(2) of Directive 92/83.

18 However, it must answer the question referred by the national court on the basis of the premiss established by the latter that the second sentence of Article 4(2) of Directive 92/83 has not been transposed into Finnish law.

19 In that regard, it must be recalled, as a preliminary point, that it is necessary, in interpreting a provision of EU law, to take into account not only its wording, but also its context and the general scheme of the rules of which it forms part and the objectives pursued thereby (judgment of 30 January 2020, Tim, C‑395/18, EU:C:2020:58, paragraph 36 and the case-law cited).

20 In accordance with Article 4(1) of Directive 92/83, Member States may apply reduced rates of excise duty to beer brewed by independent small breweries producing not more than 200 000 hectolitres of beer per year, provided, however, that those reduced rates are not more than 50% below the standard national rate of excise duty.

21 As for Article 4(2) of that directive, it states, in its first sentence, that an independent small brewery is a brewery which is legally and economically independent of any other brewery, uses facilities physically separate from those of any other brewery and does not operate under licence, and adds, in its second sentence, that, ‘however, where two or more small breweries cooperate and their combined annual production does not exceed 200 000 hl, those breweries may be treated as a single independent small brewery’.

22 It follows from the wording of Article 4(2) of Directive 92/83 and, in particular, from the adverb ‘however’ in the second sentence of thereof, which introduces a qualification to the definition set out in the first sentence, that two or more small cooperating breweries may, notwithstanding the wording of that first sentence, be treated as a single independent small brewery within the meaning of that provision, irrespective of the existence between them of a relationship of legal or economic dependence, provided that those small breweries do not in fact form an economic group whose output exceeds the limits laid down in Article 4 of that directive. The purpose of the independence criterion is to ensure that the reduced rate of duty actually benefits those breweries, the size of which represents a handicap, and not those which belong to a group (judgment of 2 April 2009, Glückauf Brauerei, C‑83/08, EU:C:2009:228, paragraph 29 and the case-law cited).

23 Furthermore, the Court notes that Directive 92/83 seeks to prevent the benefits of the application of reduced rates of excise duties from being granted to breweries, the size and capacity of which could cause distortions in the internal market (judgment of 2 April 2009, Glückauf Brauerei, C‑83/08, EU:C:2009:228, paragraph 26). Such an objective is in no way disregarded by the application of reduced rates of excise duty to beer brewed by two or more small breweries whose combined output does not exceed the limits laid down in Article 4 thereof.

24 That being so, it cannot be inferred from the foregoing that the second sentence of Article 4(2) of Directive 92/83 must be implemented by a Member State which applies reduced rates of excise duty to beer brewed by independent small breweries within the meaning of the first sentence of Article 4(2) thereof.

25 It is clear from the wording of the second sentence of Article 4(2) of Directive 92/83, in particular from the phrase ‘may be treated’, that the EU legislature has introduced an option, and not an obligation, for a Member State to treat two or more small cooperating breweries whose combined annual production does not exceed 200 000 hectolitres as a single independent small brewery, even though that Member State has taken up the option, provided for in Article 4(1) thereof, of applying reduced rates of excise duty to beer brewed by independent small breweries producing not more than 200 000 hectolitres per year.

26 That literal interpretation of the second sentence of Article 4(2) of Directive 92/83 is supported by the general scheme of Article 4 as a whole. Article 4(1) thereof provides that Member States may apply reduced rates of excise duty to beer produced by independent small breweries, as defined in the first sentence of Article 4(2), the second sentence thereof qualifies Article 4(1) by providing that Member States may also treat two or more small cooperating breweries as a single independent small brewery, provided that their combined annual production does not exceed 200 000 hectolitres, notwithstanding the fact that they are not covered by the definition of ‘independent small brewery’ referred to in the first sentence.

27 In that regard, the Court has already held that, by providing for the application of a reduced rate of excise duty on beer brewed by independent small breweries under certain conditions, Article 4 of Directive 92/83 constitutes a derogation from the application of the standard rate of excise duty on beer, so that the conditions for the application of that reduced rate of excise duty must be interpreted strictly (judgment of 4 June 2015, Brasserie Bouquet, C‑285/14, EU:C:2015:353, paragraph 19).

28 Such a requirement requires that the scope of Article 4 of that directive must not extended to situations which do not fall within it, unless the Member States have exercised the option conferred on them by that article.

29 The interpretation referred to in paragraph 25 of the present judgment is, moreover, consistent with the context of Article 4 of Directive 92/83. In that regard, the Court has held that it is justified to take into consideration Directive 92/84 laying down a minimum rate of excise duty on beer, the structure of which is determined by the first of those directives (see, to that effect, judgment of 17 May 2018, Kompania Piwowarska, C‑30/17, EU:C:2018:325, paragraph 34). However, the seventh recital of Directive 92/84 states that the methods of taxing beer vary from one Member State to another and indicates that that difference should be allowed to continue.

30 Having regard to the foregoing considerations, the answer to the first question must be that the second sentence of Article 4(2) of Directive 92/83 must be interpreted as meaning that a Member State which applies the possibility, provided for in Article 4(1) thereof, of applying reduced rates of excise duty to beer brewed by independent small breweries is not, however, obliged to treat as a single independent small brewery two or more small cooperating breweries whose combined annual production does not exceed 200 000 hectolitres.

31 Having regard to the answer given to the first question, there is no need to answer the second question.

32 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

The second sentence of Article 4(2) of Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages must be interpreted as meaning that a Member State which applies the possibility, provided for in Article 4(1) thereof, of applying reduced rates of excise duty to beer brewed by independent small breweries is not, however, obliged to treat as a single independent small brewery two or more small cooperating breweries whose combined annual production does not exceed 200 000 hectolitres.

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