“Whereas it is necessary to lay down at Community level the exemptions which apply to goods which are transported between Member States; Whereas, however, it is possible to permit Member States an option to apply exemptions tied to end-uses within their territory; … Whereas Member States should not be deprived of the means of combating any evasion, avoidance or abuse which may arise in the field of exemptions; Whereas Member States should be permitted to give effect to the exemptions required by this Directive by way of refund; …”
“Article 19 1. Member States shall apply an excise duty to ethyl alcohol in accordance with this Directive. 2. Member States shall fix their rates in accordance with Directive 92/84/EEC. Article 20 For the purposes of this Directive the term “ethyl alcohol” covers: - all products with an actual alcoholic strength by volume exceeding 1,2% volume which fall within CN [combined nomenclature] codes 2207 and 2208, even when those products form part of a product which falls within another chapter of the CN, - products of CN codes 2204, 2205 and 2206 which have an actual alcoholic strength by volume exceeding 22% vol., - potable spirits containing products, whether in solution or not.”
“The cooking liquors at issue here, however, are goods which the tax authorities of the Member State of manufacture (France) do not regard as liable to excise duty at all. That was confirmed by Répertoire Culinaire and the French Government in response to a question during the hearing before the Court. The cooking liquors had thus been released into free movement in the State of manufacture from the beginning precisely because, in the view of the authorities in that State, no excise duty at all was payable on them.”
“40. It follows that, in order to ensure the proper functioning of the internal market and to ensure the free movement of goods, the products subject to excise duty must be determined, and the exemptions applied, in a uniform manner within the European Union, unless otherwise provided. 41. The uniform application of the provisions of Directive 92/83 requires that the imposition or not of excise duty on a product and the exemption from duty of a product in a Member State must, as a rule, be recognised by all the other Member States. 42. Any other interpretation would compromise the attainment of the objective of Directive 92/83 and would be likely to hinder the free movement of goods. 43. However, in that context, a Member State cannot be bound by an incorrect application of the provisions of Directive 92/83 by another Member State nor denied the possibility, recognised by the twenty-second recital in the preamble thereto and by Article 27 of that directive, of adopting measures to combat any evasion, avoidance or abuse which may arise in the field of exemptions and to ensure the correct and straightforward application of such exemptions. 44. Nevertheless, the finding that such measures have been applied incorrectly or the adoption of such measures must be based on concrete, objective and verifiable evidence (see, to that effect,Case C-482/98 Italy v Commission[2000] ECR I-10861 , paragraphs 51 and 52).”
“47. In that connection, it must be borne in mind at the outset that, in accordance with Article 27(6) of Directive 92/83, and read in conjunction with the eighteenth and twenty-third recitals in the preamble to that directive, the Member States are to be free to give effect to the exemptions under that directive by means of a refund of excise duty paid. 48. Furthermore, it must be recalled that the objective of the exemptions contained in Directive 92/83 is, in particular, to neutralise the impact of excise duties on alcohol used as an intermediate product in other commercial or industrial products (see Italy v Commission, paragraph 4, andCase C-62/06 Profisa[2007] ECR I-3239 , paragraph 17). 49. Thus, it follows from Article 27(1)(f) of Directive 92/83, read in conjunction with the twentieth recital in the preamble to that directive, that the application of the exemption under that provision by a Member State depends on the end-use of the products in question. 50. Similarly, Article 27(1), read in conjunction with the twenty-second recital in the preamble to Directive 92/83, provides that the Member States may lay down conditions for the purpose of ensuring the correct and straightforward application of the exemptions under that provision and of preventing any evasion, avoidance or abuse. 51. In that context, it must also be recalled that the Court has held, first, that the exemption of products covered by Article 27(1) of Directive 92/83 is the rule and refusal is the exception, and, second, that the power granted to Member States by that provision to lay down conditions for the purpose of “ensuring the correct and straightforward application of such exemptions and of preventing any evasion, avoidance or abuse” cannot detract from the unconditional nature of the obligation imposed by that provision to grant exemption (see Italy v Commission, paragraph 50, and Profisa, paragraph 18). 52. It follows that, in exercising that power, the Member State concerned must put forward concrete, objective and verifiable evidence of a serious risk of evasion, avoidance or abuse (see, to that effect, Italy v Commission, paragraph 52) and that the conditions laid down by that Member State by virtue of the power thus conferred on it cannot go beyond what is necessary to attain that objective. 53. Consequently, although the Member States may give effect to the exemption under Article 27(1)(f) of Directive 92/83 by means of a refund of excise duty paid, depending on how the products in question are used, they cannot, on the other hand, make the application of that exemption conditional on compliance with conditions which are not proven, by concrete, objective and verifiable evidence, to be necessary to ensure the correct and straightforward application of such an exemption and to prevent any evasion, avoidance or abuse. 54. The evidence submitted to the Court seems to indicate that the conditions laid down by the national legislation at issue in the main proceedings, that is to say, a restriction of the persons authorised to make a claim for recovery, a four-month period for bringing such a claim and the establishment of a minimum amount of repayment, are not necessary either to ensure the correct and straightforward application of the exemption under Article 27(1)(f) of Directive 92/83 or to prevent any evasion, avoidance or abuse. 55. However, it is for the national court, before which a dispute in the main proceedings has been brought and which must assume responsibility for its subsequent judicial decision, to ascertain, on the basis of concrete, objective and verifiable evidence in its possession, whether that is the case.”
“99. Here we consider that Mr Beal is on strong ground when he bases his submissions on [53] of the Judgment – the Court of Justice’s recognition that a Member State may give effect to the exemption under Article 27(1)(f) of the Excise Directive by means of a refund of excise duty paid, depending on how the products in question are used. 100. We do not accept the submission of Mr Mercer and Mr Dewast that the requirement to pay duty before it can be refunded on proof of a qualifying use of the products concerned is a condition, to compliance with which the exemption is subject. It is a direct consequence of the explicit link in the language of Article 27(1)(f) of the Excise Directive between the exemption and the use of the products to be exempted. Once a use within Article 27(1)(f) is shown the duty paid must be refunded. It does not prejudice the unconditional nature of the exemption, because once the use is shown the benefit of the exemption accrues unconditionally. 101. Nor do we accept that HMRC is guilty of any abuse of process in advancing the contention that an exemption with refund of excise duty paid is a legitimate implementation of the Excise Duty Directive … 102. We conclude, therefore, that excise duty was properly payable on the cooking liquors, both those seized on16 July 2002 , and those in respect of which the assessments were raised on18 July 2002 . No “reading down” of the guidance given by the Court of Justice into section 4, FA 1995, or invocation of the direct effect of Article 27(1)(f) of the Excise Directive can avail RCL on this point. The establishment in the UK of a system of exemption with refund of excise duty paid is, in our judgment, immune to either of these attacks. 103. It follows that we must dismiss the New Appeal.”
“Furthermore, we consider that it is relevant at this point to have regard to the evidence that RCL’s use of the cooking liquors which it successfully imported was overwhelmingly likely to lead to their use in the manufacture of foodstuffs giving rise to a qualification for the exemption by way of refund of duty paid. Although no appropriate proof of any specific use has been shown, we find, from the evidence of RCL’s trade, that in all probability all cooking liquors taken into stock by RCL are in fact eventually used in the manufacture of foodstuffs giving rise to qualification for the exemption.”
“As we have indicated above, we regard it as reasonably certain that if the cooking liquors had not been seized their end use would have been one which would have qualified them for exemption from excise duty pursuant to Article 27(1)(f) of the Excise Directive.”
“You may only claim relief if you are a manufacturer who uses alcoholic ingredients in the production of eligible articles for wholesale supply.”
“It is clear that a person who was not a manufacturer would have some difficulty in making a claim using this form.”
“31. … The section 4 regime as enacted could be regarded as a scheme for refunds for manufacturers. That regime may have had features which were precluded by EU law (in the form of the Time and Amount Conditions), but the effect of a finding that those two conditions cannot be supported is to remove them from the manufacturer’s refund scheme. A manufacturer’s refund scheme without those conditions is compliant with EU law as a way of giving effect to a manufacturer’s Art 27 rights. 32. However by limiting the refund to manufacturers, the UK has not given effect to the right to exemption held by other persons under Art 27, either by direct exemption or by giving effect to the exemption via a refund. Those persons are entitled to exemption one way or another, but no exemption is provided for in section 4. Therefore section 4 must be read as subject to that right held by those persons. There is nothing which permits HMRC to seek to give effect to that right via a refund.”
“Article 27 is not conferring a right to a refund, it confers a right to be exempt from duty in the relevant circumstances. If the State wishes to give effect to that right by a refund mechanism it is free to do so but that is another matter.”
“Put another way, if the FTT did not make a factual finding in relation to whether the cooking liquors had or had not actually been used for a qualifying purpose the FTT would in effect have determined that even if qualifying use were proven the appeal would fail, and that in our judgment would be an error of law which enables us to make a factual finding on the issue if we are able to do so.”
“51. Bearing all this in mind, it is much more likely than not that the cooking liquors which were the subject of the larger assessment, i.e. the products which had been sold by RCL in and before 2002, have been used for a qualifying purpose. We make that finding of fact. This is not a conclusion that goods are exempt at source nor is it a conclusion the likely destiny of a given bottle of cooking wine is sufficient for the exemption; it is a conclusion that on the balance of probabilities all the products which were sold were in fact used for a qualifying purpose.”
“Where such an inconsistency exists the statutory provision is to be read and take effect as though the statute had enacted that the offending provision was to be without prejudice to the directly enforceable Community rights of persons having the benefit of such rights. That is the effect ofsection 2 of the European Communities Act 1972 , as explained by your Lordships’ House in R v Secretary of State for Transport, Ex p Factortame Ltd[1990] 2 AC 85 , 140, and Imperial Chemical Industries Plc v Colmer(No.2)[1999] 1 WLR 2035 , 2041.”
“Regulation 2 amends section 4 [of FA 1995] so that claimants are no longer restricted to wholesaler manufacturers, there is no minimum amount for a repayment claim and except as the Commissioners may otherwise allow, the time limit for making a claim is no later than 3 years after the end of the period of 3 months during which the liquor was used. These Regulations implement Article 27(1)(c) and (f) of [the Excise Directive].”
“We are not in the position of a court hearing a restitutionary claim. Our function is to determine the assessments. But we take from Metallgesellschaft that it can be a breach of the principle of Effectiveness to treat, as a reason for withholding the benefit of an EU law right to which a party was entitled, a failure by that party to apply to the State for a remedy which, at the time, was prohibited by the relevant legislation.”
“70. On the other hand in Autologic Lord Nicholls, with whom the majority agreed, said (at [30]) that to require a claimant to make a group relief election which, as the law stood, would inevitably be refused and which would require statutory adaptation on appeal to accommodate the claim, did not render the statutory route practically impossible or excessively difficult. As a result he did not view the Effectiveness principle as requiring that the claim could not be brought through the normal statutory appeal mechanism rather than as a separate action. Lord Nicholls distinguished between the position of a claimant against whom the defence had been raised that it had not pursued the statutory channels and a claimant who had open to it the possibility of pursuing that course and wished to pursue another.”
“74. A Member State which makes it practically impossible or excessively difficult to exercise a community law right does not give effect to that right. The effect of Art 27 is to give the taxpayer a right to exemption. A refund procedure which would deprive the taxpayer of the ability of exercising the right to exemption without making a challenge to the domestic legislation and domestic practice in circumstances where the correct path is uncertain because of the way the State implemented the Directive, is a procedure which makes it excessively difficult to exercise the right. 75. In our judgment reading section 4 in the manner proposed by HMRC does not give effect to the EU law rights of parties such as RCL. Deleting this sort of limitation from this sort of provision has the effect of widening its scope after the event. The Manufacturer’s Condition excluded from the UK refund scheme an entire class of persons. Those excluded persons (such as RCL) were still obliged by the legislation as a whole to pay the duty. It is the disapplication of that exclusion which creates the Metallgesellschaft problem. Conversely, reading in to section 4 an implicit exception for persons who do not satisfy that Condition gives full effect to the principle of Effectiveness. 76. A further reason why we prefer to read in an implicit exception into the legislation is that to take that approach “goes with the grain” of the legislation much more than simply disapplying whole parts of provisions enacted by Parliament. The repayment regime is a workable regime for anyone who satisfies the Three Conditions. For a manufacturer who makes the claim within the appropriate time and for an appropriate sum of money, the scheme works and gives effect to Art 27. At most one might need to disapply the second and third conditions, leaving a scheme for refunds for manufacturers, which is what Parliament unquestionably intended. In a case in which the State had a choice how to give effect to the exemption right under Art 27, it risks usurping the function of Parliament for the court to assume that it intended to give refunds to anyone else.”
“81. For the reasons set out above, we have concluded that the UK did not give effect to RCL’s rights. As a result we conclude that the FTT were wrong in concluding that RCL’s rights arose under the UK’s refund scheme. We have therefore set aside the decision and shall remake it. 82. We have found as a fact that RCL is entitled to exemption from duty in relation to the larger assessment. Since the legislation has to be read as implicitly subject to the EU law right of a person entitled to exemption from duty who is not within the Three Conditions, RCL does not owe any duty for that consignment of cooking liquor. Accordingly we will allow the appeal on the larger assessment.”
“The Commission considers that such a mechanism [i.e. a refund mechanism] is not the only acceptable way of ensuring compliance with the conditions of the exemption. In its view the right to benefit from the exemption may be acquired once there is a sufficient degree of certainty that the product will be used for production of foodstuffs of the kind covered by the exemption. Such a degree of certainty may be achieved, for example, by the addition to the products subject to excise of ingredients which effectively preclude their use for any purpose other than that envisaged by the exemption … It should be borne in mind in that regard that there are no uniform standards for the preparation of cooking wines and the nature and amount of added ingredients may vary significantly.”
“The statutory route prescribed for group relief claims was not designed for claims in respect of non-resident companies. So, as United Kingdom law presently stands, at the initial step a taxpayer’s group relief claim will inevitably be refused by the Revenue. Further, as already noted, some statutory requirements will need adaptation to accommodate claims in respect of non-resident companies. But neither of these features should present any major problem. Neither of them renders the statutory route “practically impossible or excessively difficult”