JUDGMENT OF THE COURT (Fifth Chamber)

11 June 1998 (1)

(Value added tax — Interpretation of Article 3(a) of the Eighth CouncilDirective 79/1072/EEC — Obligation of taxpayers not established in the countryconcerned to annex the original invoices or import documents to applications fora refund of the tax — Possibility of annexing a duplicate where the original hasbeen lost for reasons beyond the control of the taxpayer)

In Case C-361/96,

REFERENCE to the Court under Article 177 of the EC Treaty by theFinanzgericht Köln (Germany) for a preliminary ruling in the proceedings pendingbefore that court between

Société Générale des Grandes Sources d'Eaux Minérales Françaises

and

Bundesamt für Finanzen,

on the interpretation of Article 3(a) of the Eighth Council Directive 79/1072/EECof 6 December 1979 on the harmonisation of the laws of the Member Statesrelating to turnover tax — Arrangements for the refund of value added tax topersons not established in the territory of the country (OJ 1979 L 331, p. 11),

THE COURT (Fifth Chamber),

composed of: C. Gulmann, President of the Chamber, M. Wathelet,J.C. Moitinho de Almeida (Rapporteur), D.A.O. Edward and J.-P. Puissochet,Judges,

Advocate General: G. Cosmas,

Registrar: H.A. Rühl, Principal Administrator,

after considering the written observations submitted on behalf of:

—    Société Générale des Grandes Sources d'Eaux Minérales Françaises, byB. Hense, Manager, C&L Treuhand-Vereinigung Deutsche Revision AG,and K.P. Karig, Manager of the Tax Division, C&L Treuhand-VereinigungDeutsche Revision AG, Frankfurt am Main,

—    the German Government, by E. Röder, Ministerialrat at the FederalMinistry of Economic Affairs, acting as Agent,

—    the Commission of the European Communities, by J. Grunwald, LegalAdviser, acting as Agent,

having regard to the Report for the Hearing,

after hearing the oral observations of Société Générale des Grandes Sourcesd'Eaux Minérales Françaises, represented by H. Morin-Hauser, tax adviser of C&LTreuhand-Vereinigung Deutsche Revision AG, the German Government,represented by E. Röder, and the Commission, represented by J. Grunwald, at thehearing on 15 January 1998,

after hearing the Opinion of the Advocate General at the sitting on 12 February1998,

gives the following

Judgment

1.

    By order of 29 August 1996, received at the Court on 12 November 1996, theFinanzgericht Köln (Finance Court, Cologne) referred to the Court for apreliminary ruling under Article 177 of the EC Treaty two questions on theinterpretation of Article 3(a) of the Eighth Council Directive 79/1072/EEC of 6December 1979 on the harmonisation of the laws of the Member States relating toturnover tax — Arrangements for the refund of value added tax to persons not

established in the territory of the country (OJ 1979 L 331, p. 11, hereinafter 'theEighth Directive‘).

2.

    The questions arose in proceedings between the Société Générale des GrandesSources d'Eaux Minérales Françaises and the Bundesamt für Finanzen (the FederalTax Office, hereinafter 'the Bundesamt‘) on the issue of whether the plaintiff inthose proceedings could produce as evidence of its entitlement to a refund of inputVAT a duplicate invoice, the original having been lost for reasons beyond hiscontrol.

The Eighth Directive

3.

    Article 2 of the Eighth Directive provides:

'Each Member State shall refund to any taxable person who is not established inthe territory of the country but who is established in another Member State, subjectto the conditions laid down below, any value added tax charged in respect ofservices or movable property supplied to him by other taxable persons in theterritory of the country or charged in respect of the importation of goods into thecountry, in so far as such goods and services are used for the purposes of thetransactions referred to in Article 17(3)(a) and (b) of Directive 77/388/EEC and ofthe provision of services referred to in Article 1(b).‘

4.

    Article 3(a) provides:

'To qualify for refund, any taxable person as referred to in Article 2 who suppliesno goods or services deemed to be supplied in the territory of the country shall:

(a)    submit to the competent authority referred to in the first paragraph ofArticle 9 an application modelled on the specimen contained in Annex A,attaching originals of invoices or import documents. Member States shallmake available to applicants an explanatory notice which shall in any eventcontain the minimum information set out in Annex C.‘

5.

    Annex C of the Eighth Directive, entitled 'Minimum information to be given inexplanatory notes‘, states in point H:

'The application shall be accompanied by the originals of the invoices or importdocuments showing the amount of value added tax borne by the applicant.‘

6.

    Finally, Article 7(3) and (4) provides:

'3.    The competent authority referred to in the first paragraph of Article 9 shallstamp each invoice and/or import document to prevent their use for furtherapplication and shall return them within one month.

4.    Decisions concerning applications for refund shall be announced within sixmonths of the date when the applications, accompanied by all the necessarydocuments required under this directive for examination of the application,are submitted to the competent authority referred to in paragraph 3. ...‘

The German legislation

7.

    Paragraph 18(9) of the Umsatzsteuergesetz of 26 November 1979 (the GermanLaw on Turnover Tax, hereinafter 'the UStG‘) provides as follows:

'By way of exception to Paragraph 16 and paragraphs (1) to (4) and in order tosimplify the tax collection procedure, the Federal Ministry of Finance may, bydecree and subject to the approval of the Bundesrat, apply a special procedure, forundertakings not established in the territory of collection, for the refund of inputtax. In such cases, the undertaking may be required to calculate the amount of therefund itself.‘

8.

    The Umsatzsteuer-Durchführungsverordnung (Turnover Tax ImplementingRegulation, 'the UStDV‘) of 21 December 1979 lays down the special procedurefor obtaining a refund of input tax. Paragraph 61(1) thereof provides as follows:

'The undertaking must apply for a refund on the form prescribed for the purposeto the Bundesamt für Finanzen or the tax office determined in accordance with thesecond sentence of Paragraph 5(1)(8) of the Finanzverwaltungsgesetz (FiscalAdministration Law). The application must be made within six months of the endof the calendar year in which entitlement to a refund arose. The undertaking mustcalculate the amount of the refund in its application. The application precludesfurther claims within the meaning of Paragraph 19(2) of the Law. The originalinvoices and import documents must be submitted with the application.‘

9.

    Paragraph 163(1) of the Abgabenordnung (the German Tax Code, 'the AO‘) of16 March 1976 provides in addition:

'Taxes may be set at a lower level and bases of assessment which would increasethem left out of account if levying the tax would be inequitable in the circumstancesof an individual case. With the agreement of the taxpayer it is possible in the caseof income tax for certain elements which increase the tax to be taken into accountonly at a later date and for others which reduce it to be taken into account inadvance. The decision concerning such an exception may be linked to thedetermination of the tax.‘

10.

    Paragraph 155(6) of the AO provides:

'The provisions relating to the determination of the tax are applicable by analogyto decisions on refund of tax.‘

The facts

11.

    The plaintiff in the main proceedings is a company whose registered office is inFrance. In connection with the termination of a dealership agreement with UnionDeutsche Lebensmittelwerke GmbH (hereinafter 'UDL‘) it entered into anagreement with the latter in January 1989 in which it undertook to pay itDM 3 500 000, together with DM 490 000 by way of VAT.

12.

    The plaintiff claims that the original invoice drawn up by UDL was lost in the postwhen it was sent to the lawyers instructed by it to claim a refund of the VAT fromthe Bundesamt.

13.

    The plaintiff therefore had a duplicate of the original invoice made out by UDLwhich it submitted to the Bundesamt together with its application for a refund ofVAT. The latter determined the amount of the refund by notice of 4 March 1993but did not grant the application. The plaintiff challenged that decision before theFinanzgericht Köln, which dismissed the action as unfounded by a judgment of 3July 1996. The plaintiff brought an appeal on a point of law against that judgmentbefore the Bundesfinanzhof; that action is still pending.

14.

    Even before the proceedings concerning the notice of determination of the refundwere concluded, the plaintiff also applied to the Bundesamt for the refund to begranted on equitable grounds in accordance with Paragraph 163(1) of the AO. Inthe notice of 4 March 1993, referred to above, determining the amount of therefund the Bundesamt refused to grant that application, too, on the grounds thatParagraph 61(1) of the UStDV required the original invoice to be annexed to theapplication for a refund. The plaintiff lodged an appeal against that decision beforethe Bundesministerium der Finanzen (the Federal Ministry of Finance), which waslikewise dismissed on 7 June 1994.

15.

    The plaintiff then brought an action before the Finanzgericht challenging therefusal of the Bundesamt to grant a refund on equitable grounds in accordancewith Paragraph 163(1) of the AO. It pointed out that the provision in the fifthsentence of Paragraph 61(1) of the UStDV is designed to prevent multiple refundsof VAT. However, such multiple refunds are precluded in this case because thereis no doubt that the original invoice has not been used in order to obtain a refundof VAT. In the first place, the Bundesamt could easily verify that the tax authoritieshad not received a second application for reimbursement relating to the sametransaction, since any such application would have had to have been submitted, in

accordance with Paragraph 61(1), first sentence, of the UStDV, to the 'Bundesamtfür Finanzen or the tax office determined in accordance with the second sentenceof Paragraph 5(1)(8) of the Finanzverwaltungsgesetz‘. In the second place, theoriginal could no longer be used in future to obtain a refund of VAT since noapplication was made within the time-limit laid down in the second sentence ofParagraph 61 of the UStDV, that is to say, within six months of the end of thecalendar year in which entitlement to the refund arose. The plaintiff claims thatthere is therefore no risk that acceptance of the duplicate invoice would permit adouble refund of VAT.

16.

    In the circumstances the plaintiff considers that strict application of the fifthsentence of Paragraph 61(1) of the UStDV leads to too rigorous a result, whichshould be mitigated by the application of equitable principles. Furthermore, strictapplication of the fifth sentence of Paragraph 61(1) of the UStDV would also runcounter to the principles of proportionality and neutrality of VAT laid down byCommunity law.

17.

    The Bundesamt considers that a refund of VAT based, on equitable grounds, ona duplicate would run counter to the intention of the authors of the UStDV.According to Paragraph 61(1), fifth sentence, of the UStDV, the possibility ofmultiple refunds of VAT can be safely excluded only if the original invoices aresubmitted. The Bundesamt also points out that the fifth sentence of Paragraph61(1) of the UStDV corresponds to Article 3 of the Eighth Directive.

18.

    The Finanzgericht observes that the German Federal Ministry of Finance based itsrefusal on the fact that Article 3(a) of the Eighth Directive makes no provision forany exception to the obligation to submit the original invoice with the applicationfor a refund, even on grounds of equity where loss of the original is not attributableto the person seeking a refund.

19.

    It points out that on a literal interpretation of Article 3(a) of the Eighth Directivesubmission of the original documents is a mandatory requirement which permits ofno exceptions in any circumstances whatsoever. That interpretation reflects thepurpose of Article 3(a), which is to ensure that multiple refunds of VAT are notobtained by fraudulent means. However, there is more risk of that occurring in thecase of applications for refunds submitted by undertakings established in a differentMember State. It points out that the fact that the competent authorities arerequired by Article 7(3) of the Eighth Directive to stamp each invoice or importdocument in order to ensure that those documents are not used again for anotherapplication, and the obligation set out in Article 7(4) to settle applications forrefunds within six months of submission of the requisite documents, may be takenas an indication that the procedure for obtaining refunds was designed to be asimplified procedure in which the requirements of speed and certainty must takeprecedence over the objective justice of the result.

20.

    It raises the question, however, whether such an interpretation of Article 3(a) ofthe Eighth Directive is compatible with the principle of neutrality of VAT set outin the second recital in the preamble to the directive, and the principle of non-discrimination set out in both Article 95 of the EC Treaty and the fifth recital inthe preamble to the directive, inasmuch as if the original invoice has been receivedby an undertaking established in Germany and subsequently lost through no faultof its own, the undertaking may deduct the input VAT on production of a duplicateor a photocopy of the invoice and thus obtain an equitable result on the basis ofthe amount shown on the duplicate or the photocopy.

21.

    Article 3(a) of the Eighth Directive should perhaps therefore be interpreted asdefining the basic rules governing entitlement to refund of VAT whilst leavingMember States a margin of discretion regarding the conditions under which suchentitlement arises, and in particular the type of evidence required; or as providing,as a general rule, that originals must be submitted but authorises Member Statesto permit derogations from that rule in exceptional circumstances, in particularwhere, as in this case, the loss of the original is not attributable to the undertakingestablished in another Member State; or, again, as requiring duplicates to beaccepted where, as in this case, the refusal to accept them would placeundertakings established in another Member State at a disadvantage compared withthose established in the Member State concerned.

22.

    Lastly, the German court notes that this case is closely linked to another, Reisdorf,which concerns the question whether deduction of input VAT paid by anundertaking established in the Member State concerned depends on whether or notthat undertaking is in possession of the original document; that case was pendingbefore the Court of Justice at the relevant time (Case C-85/95 [1996] ECR I-6257).

23.

    In those circumstances, the Finanzgericht decided to stay the proceedings and referthe following questions to the Court of Justice for a preliminary ruling:

'1.    Does Article 3(a) of the Eighth Council Directive of 6 December 1979 onthe harmonisation of the laws of the Member States relating to turnovertaxes preclude the Member States from providing in their national law thata taxable person referred to in Article 2 of the directive may prove hisentitlement to a refund by submitting a duplicate invoice or importdocument where the original has been lost for reasons beyond his control?

2.    Should the first question be answered in the negative, does it follow fromthe prohibition on discrimination under Community law and from theprinciple of neutrality of turnover taxes that a taxable person referred to inArticle 2 of the directive has the right to prove his entitlement to a refundby submitting a duplicate of the invoice or import document referred to inArticle 3(a) where the original has been lost for reasons beyond hiscontrol?‘

The first question

24.

    Article 3(a) of the Eighth Directive provides expressly that in order to qualify fora refund of input VAT, any taxable person not established in the territory of thecountry concerned may 'submit ... an application ... attaching originals of invoicesor import documents‘. Annex C to the directive, which determines the minimuminformation to be given in the explanatory notes to be provided by Member Statesfor taxpayers seeking a refund, confirms in point H that '[t]he application shall beaccompanied by the originals of the invoices or import documents showing theamount of value added tax borne by the applicant‘.

25.

    That the original document must be annexed to the application for a refund is alsoborne out by Article 7(3) of the Eighth Directive, which states that '[t]hecompetent authority ... shall stamp each invoice and/or import document to preventtheir use for further application ...‘.

26.

    The result of those provisions is that applications for a refund submitted inaccordance with the Eighth Directive by a taxpayer who is not established in theMember State concerned must, in principle, be accompanied by the originalinvoices or import documents establishing the amount of VAT in respect of whicha refund is sought.

27.

    Those provisions of the Eighth Directive differ from Article 18(1)(a) and Article22(3) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on theharmonisation of the laws of the Member States relating to turnover taxes —Common system of value added tax: uniform basis of assessment (OJ 1977 L 145,p. 1), according to which exercise of the right to deduct input tax is normallydependent on possession of the original of the invoice or of the document which,under the criteria determined by the Member State in question, may be consideredto serve as an invoice, as the Court held in Reisdorf, cited above, at paragraph 22.

28.

    The different wording reflects the general purpose of the Eighth Directive, whichis stated in the sixth recital in the preamble as being that of preventing 'certainforms of tax evasion or avoidance‘ and the aim pursued in particular by Article7(3) of the directive of preventing undertakings not established in the MemberState concerned from re-using the invoice or import document to make furtherapplications for a refund.

29.

    Nevertheless, Article 3(a) of the Eighth Directive cannot be interpreted asprecluding Member States from accepting such an application for a refund inexceptional circumstances where there is no doubt that the transaction which ledto the application for a refund occurred, where the loss of the invoice or importdocument is not attributable to the taxpayer and where it is established that, inview of the circumstances, there is no risk of further applications for a refund.

30.

    In that connection the Court has held that secondary law must comply with thegeneral principles of law, and in particular the principle of proportionality (Case114/76 Bela-Mühle v Grows-Farm [1977] ECR 1211, paragraphs 5 to 7). Exclusionof the possibility mentioned is not necessary in this case to prevent fraud or taxevasion.

31.

    The reply to the first question must therefore be that Article 3(a) of the EighthDirective is to be interpreted as not precluding Member States from providing intheir national law that a taxable person who is not established in that MemberState may prove his entitlement to a refund by submitting a duplicate invoice orimport document where the original has been lost for reasons beyond his control,provided that the transaction which led to the application for a refund occurredand there is no risk of further applications for a refund.

The second question

32.

    The second question asks in essence whether, where a taxpayer established in aMember State may prove his entitlement to a refund of VAT by submitting aduplicate or photocopy of the invoice if the original invoice which he received hassubsequently been lost for reasons beyond his control, the principles of non-discrimination and neutrality of VAT require such a possibility to be extended totaxpayers not established in that Member State.

33.

    According to the order making the reference, where the original invoice has beenreceived by an undertaking established in Germany and is subsequently lost forreasons beyond his control, he may deduct input VAT on production of a duplicateor photocopy of the invoice and obtain an equitable result on the basis of theamount shown on the duplicate or photocopy.

34.

    Furthermore, in accordance with the principle of non-discrimination set out inArticle 6 of the EC Treaty, the fifth recital in the preamble to the Eighth Directiveexpressly records that the directive 'must not lead to the treatment of taxablepersons differing according to the Member State in the territory of which they areestablished‘. However, it is settled law that discrimination can arise only throughthe application of different rules to comparable situations or the application of thesame rule to different situations (see inter alia Case C-279/93 Schumacker [1995]ECR I-225, paragraph 30).

35.

    The German Government claims that the absence of an exception to the obligationto attach the original document to cover cases where the original has been lostthrough no fault of the taxpayer is justified by the risk of misuse of documentsother than the original where applications for a refund of VAT are made bytaxpayers not established in the Member State concerned, whose accounts andoperating methods, unlike those of taxpayers established in the country concerned,

cannot be checked by the competent authorities and in respect of whom theprocedure for requesting administrative assistance between the Member States isgenerally lengthy and unproductive.

36.

    Those reasons cannot in any event justify different treatment of taxpayersdepending on whether they are established in the Member State concerned orelsewhere, if the transaction which led to the application for a refund occurred, ifthe loss of the invoice or import document is not attributable to the taxpayerconcerned and if there is no risk of further applications for a refund.

37.

    In so far as in such a situation the principle of non-discrimination requirestaxpayers not established in the Member State concerned to be permitted to provetheir entitlement to a refund of VAT by submitting a duplicate or photocopy of theinvoice under the same conditions as taxpayers established in the Member Stateconcerned, it is not necessary to examine the second question in the light of theprinciple of neutrality of VAT.

38.

    The reply to the second question is therefore that where a taxable personestablished in a Member State may prove his entitlement to a refund of VAT bysubmitting a duplicate or photocopy of the invoice if the original which he receivedhas been lost for reasons beyond his control, the principle of non-discrimination setout in Article 6 of the Treaty and referred to in the fifth recital in the preamble tothe Eighth Directive requires that the same possibility be extended to taxablepersons not established in that Member State if the transaction which led to theapplication for a refund occurred and there is no risk of further applications for arefund.

Costs

39.

    The costs incurred by the German Government, which submitted observations tothe Court, are not recoverable. Since these proceedings are, for the parties to themain action, a step in the proceedings pending before the national court, thedecision on costs is a matter for that court.

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Finanzgericht Köln by order of 29August 1996, hereby rules:

1.    Article 3(a) of the Eighth Council Directive 79/1072/EEC of 6 December1979 on the harmonisation of the laws of the Member States relating toturnover taxes — Arrangements for the refund of value added tax to taxable

persons not established in the territory of the country is to be interpretedas not precluding Member States from providing in their national law thata taxable person who is not established in that Member State may provehis entitlement to a refund by submitting a duplicate invoice or importdocument where the original has been lost for reasons beyond his control,provided that the transaction which led to the application for a refundoccurred and there is no risk of further applications for a refund.

2.    Where a taxable person established in a Member State may prove hisentitlement to a refund of value added tax by submitting a duplicate orphotocopy of the invoice if the original which he received has been lost forreasons beyond his control, the principle of non-discrimination set out inArticle 6 of the EC Treaty and referred to in the fifth recital in thepreamble to the Eighth Directive 79/1072 requires that the same possibilitybe extended to taxable persons not established in that Member State if thetransaction which led to the application for a refund occurred and there isno risk of further applications for a refund.

GulmannWathelet Moitinho de Almeida Edward Puissochet

Delivered in open court in Luxembourg on 11 June 1998.

R. Grass

C. Gulmann

Registrar

President of the Fifth Chamber

1: Language of the case: German.