Optigen Ltd (C-354/03), Fulcrum Electronics Ltd (C-355/03) and Bond House Systems Ltd (C-484/03) v Commissioners of Customs & Excise.

• Jurisdiction: European Union
• Celex Number: 62003CJ0354
• ECLI: ECLI:EU:C:2006:16
• Docket Number: C-484/03,C-354/03,,C-355/03
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling
• Date: 12 January 2006

Joined Cases C-354/03, C-355/03 and C-484/03

Optigen Ltd, Fulcrum Electronics Ltd

and

Bond House Systems Ltd

v

Commissioners of Customs & Excise

(Reference for a preliminary ruling from the High Court of Justice of England and Wales, Chancery Division)

(Sixth VAT Directive – Article 2(1), Article 4(1) and (2) and Article 5(1) – Deduction of input tax – Economic activity – Taxable person acting as such – Supply of goods – Transaction forming part of a chain of supply involving a defaulting trader or a trader using an unauthorised VAT number – Carousel fraud)

Summary of the Judgment

Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Supplies of goods or services effected by a taxable person acting as such

(Council Directive 77/388, Arts 2(1), 4 and 5(1))

Transactions in which a taxable person established in a Member State buys goods from companies established in that Member State and sells them to purchasers established in another Member State, and which are not themselves vitiated by value added tax fraud, constitute supplies of goods or services effected by a taxable person acting as such and an economic activity within the meaning of Articles 2(1), 4 and 5(1) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes where they fulfil the objective criteria on which the definitions of those terms are based, regardless of the intention of a trader other than the taxable person concerned involved in the same chain of supply and/or the possible fraudulent nature of another transaction in the chain, prior or subsequent to the transaction carried out by that taxable person, of which that taxable person had no knowledge and no means of knowledge. The right to deduct input value added tax of a taxable person who carries out such transactions cannot be affected by the fact that in the chain of supply of which those transactions form part another prior or subsequent transaction is vitiated by value added tax fraud, without that taxable person knowing or having any means of knowing.

(see paras 51-52, 55, operative part)

JUDGMENT OF THE COURT (Third Chamber)

12 January 2006 (*)

(Sixth VAT Directive – Article 2(1), Article 4(1) and (2) and Article 5(1) – Deduction of input tax – Economic activity – Taxable person acting as such – Supply of goods – Transaction forming part of a chain of supply involving a defaulting trader or a trader using an unauthorised VAT number – Carousel fraud)

In Joined Cases C-354/03, C-355/03 and C-484/03,

REFERENCES for a preliminary ruling under Article 234 EC from the High Court of Justice of England and Wales, Chancery Division (United Kingdom), made by decisions of 28 July 2003 (C-354/03 and C-355/03) and 27 October 2003 (C-484/03), received at the Court on 18 August and 19 November 2003 respectively, in the proceedings

Optigen Ltd (C-354/03),

Fulcrum Electronics Ltd (C-355/03),

Bond House Systems Ltd (C-484/03)

v

Commissioners of Customs & Excise,

THE COURT (Third Chamber),

composed of A. Rosas, President of the Chamber, J. Malenovský, J.-P. Puissochet, S. von Bahr (Rapporteur) and U. Lõhmus, Judges,

Advocate General: M. Poiares Maduro,

Registrar: L. Hewlett, Principal Administrator,

having regard to the written procedure and further to the hearing on 8 December 2004,

after considering the observations submitted on behalf of:

– Optigen Ltd, by T. Beazley QC and J. Herberg, Barrister,

– Fulcrum Electronics Ltd, by R. Englehart QC and A. Lewis, Barrister,

– Bond House Systems Ltd, by K.P.E. Lasok QC and M. Patchett-Joyce, Barrister,

– the United Kingdom Government, by C. Jackson (C‑354/03, C‑355/03 and C-484/03) and K. Manji (C-484/03), acting as Agents, and by R. Anderson QC and I. Hutton, Barrister,

– the Czech Government, by T. Boček, acting as Agent (C‑354/03, C-355/03 and C-484/03),

– the Danish Government, by J. Molde and A. Rahbøl Jacobsen, acting as Agents, and by P. Biering, advokat (C‑484/03),

– the Council of the European Union, by A.-M. Colaert and J. Monteiro, acting as Agents (C-354/03 and C-355/03),

– the Commission of the European Communities, by R. Lyal, acting as Agent (C-354/03, C-355/03 and C-484/03),

after hearing the Opinion of the Advocate General at the sitting on 16 February 2005,

gives the following

Judgment

1 The references for a preliminary ruling concern the interpretation of First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (OJ, English Special Edition 1967, p. 14), as amended by Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation 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, ‘the First Directive’), and the interpretation of Sixth Directive 77/388, as amended by Council Directive 95/7/EC of 10 April 1995 (OJ 1995 L 102, p. 18, ‘the Sixth Directive’).

2 The references were made in the course of three sets of proceedings brought by Optigen Ltd (‘Optigen’), Fulcrum Electronics Ltd, in liquidation, (‘Fulcrum’) and Bond House Systems Ltd (‘Bond House’) against the Commissioners of Customs & Excise (‘the Commissioners’) concerning the rejection by the Commissioners of the claims for reimbursement of value added tax (‘VAT’) paid on the purchase in the United Kingdom of CPUs which were subsequently exported to another Member State.

Legal context

3 Article 2 of the First Directive is worded as follows:

‘The principle of the common system of value added tax involves the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services, whatever the number of transactions which take place in the production and distribution process before the stage at which tax is charged.

On each transaction, value added tax, calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of value added tax borne directly by the various cost components.

The common system of value added tax shall be applied up to and including the retail trade stage.’

4 Under Article 2(1) of the Sixth Directive, a supply of goods or services effected for consideration by a taxable person acting as such is subject to VAT.

5 Under Article 4(1) of the Sixth Directive, ‘taxable person’ means any person who independently carries out any economic activity specified in Article 4(2). The term ‘economic activities’ is defined in Article 4(2) as comprising all activities of producers, traders and persons supplying services, including the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis.

6 Under Article 5(1) of that directive, ‘“[s]upply of goods” shall mean the transfer of the right to dispose of tangible property as owner’.

7 Article 17(1) to (3) of the Sixth Directive provides:

‘1. The right to deduct shall arise at the time when the deductible tax becomes chargeable.

2. In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:

(a) value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person;

(b) value added tax due or paid in respect of imported goods;

…

3. Member States shall also grant to every taxable person the right to a deduction or refund of the value added tax referred to in paragraph 2 in so far as the goods and services are used for the purposes of:

(a) transactions relating to the economic activities as referred to in Article 4(2) carried out in another country, which would be eligible for deduction of tax if they had occurred in the territory of the country;

…’.

The main proceedings

8 According to the orders for reference, at the material time Optigen, Fulcrum and Bond House essentially carried on the business of buying CPUs from companies established in the United Kingdom and selling them to purchasers established in another Member State.

9 Optigen claimed a net balance of refundable VAT in excess of GBP 7 million in its VAT return in respect of June 2002. By decisions of 16 and 31 October 2002, the Commissioners declined to allow an amount of just over GBP 7 million of that claim. Similarly, by a decision of 30 October 2002, the Commissioners disallowed the refund of just over GBP 13 million in respect of July of that year.

10 Fulcrum claimed a net balance of input VAT of nearly GBP 7.2 million in its VAT return in respect of June 2002. By a decision of 11 November 2002, the Commissioners disallowed nearly GBP 2 million of the sum claimed. Similarly, in respect of July 2002 they disallowed about GBP 1.1 million out of a total claim of nearly GBP 4 million. In addition, in February 2003 the Commissioners issued an assessment against...