On October 15, 2015 the Court of Justice of the European Union (CJEU) ruled in Case C‑306/14 Direktor na Agentsia ‘Mitnitsi’ versus Biovet AD (ECLI:EU:C:2015:689).

·        What is the meaning of the term “manufacturing process” in Article 27(2)(d) of Directive 92/83 and does that term include cleaning and/or disinfection as processes for achieving specific degrees of cleanliness which are prescribed by good practice in the production of medicines?

·        Does Article 27(2)(d) of Directive 92/83 permit the enactment of a legal provision under which, after the Member States have introduced legislation exempting alcohol from harmonised excise duty on condition that the alcohol is used in a manufacturing process and that the end product does not contain any alcohol, alcohol used for cleaning is deemed, for the purposes of the application of that exemption, not to have been used in a manufacturing process?

·        Having regard to the principles of legal certainty and the protection of legitimate expectations, is it permissible for a deeming provision such as that in Article 22(7) of the ZADS to be enacted with immediate effect (that is to say, without providing any reasonable period for market participants to adjust their behaviour) if it restricts refunds of excise duty on alcohol used as a cleaning material in the case where the exemption from excise duty has been enacted by the Member State within the scope of its discretion?

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

·        Biovet manufactures medicinal products and markets veterinary medicinal products, agricultural products and medicinal products for human use.

·        In its manufacturing of medicinal products, Biovet uses ethyl alcohol, in the form of a 70% water-based solution of ethanol, to clean and disinfect technical equipment, production facilities and working areas and surfaces.

·        On 14 September 2012 Biovet applied for a refund of excise duty paid on 271 litres of ethyl alcohol which had been used for those purposes between 1 August and 31 August 2012.

·        By a decision of the Nachalnik na Mitnitsa ‘Plovdiv’ (Head of the Plovdiv Customs Office, Bulgaria), refund of the excise duty was refused. That decision was challenged by administrative appeal and confirmed by decision of the Director.

·        Biovet brought an action against that decision before the Administrativen sad Sofia-grad (Administrative Court, Sofia, Bulgaria), which held that cleaning and disinfection constitute different activities which form part of the process for the manufacture of a final product which does not contain alcohol, with the result that the excise duty which was paid on the acquisition of the alcohol used for disinfectant purposes was to be refunded pursuant to Article 22(4)(4) of the ZADS and was not covered by Article 22(7) thereof.

·        The Director appealed against the judgment of the Administrativen sad Sofia-grad to the referring court.

·        In those circumstances, the Varhoven administrativen sad (Supreme Administrative Court, Bulgaria) decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:

1.   What is the meaning of the term “manufacturing process” in Article 27(2)(d) of Directive 92/83 and does that term include cleaning and/or disinfection as processes for achieving specific degrees of cleanliness which are prescribed by good practice in the production of medicines?

2.   Does Article 27(2)(d) of Directive 92/83 permit the enactment of a legal provision under which, after the Member States have introduced legislation exempting alcohol from harmonised excise duty on condition that the alcohol is used in a manufacturing process and that the end product does not contain any alcohol, alcohol used for cleaning is deemed, for the purposes of the application of that exemption, not to have been used in a manufacturing process?

3.   Having regard to the principles of legal certainty and the protection of legitimate expectations, is it permissible for a deeming provision such as that in Article 22(7) of the ZADS to be enacted with immediate effect (that is to say, without providing any reasonable period for market participants to adjust their behaviour) if it restricts refunds of excise duty on alcohol used as a cleaning material in the case where the exemption from excise duty has been enacted by the Member State within the scope of its discretion?

The CJEU ruled as follows:

Article 27(1)(d) 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 the obligation to exempt laid down in that provision applies to ethyl alcohol used by an undertaking for cleaning or disinfecting equipment and facilities used in the production of medicines.

For further information click here to be forwarded to the text of the ruling as published on the website of the CJEU, which will open in a new window.

Did you know that in our section CJEU Rulings we have made a selection of rulings of the CJEU? We have organized these rulings based on the subject they relate to (e.g. Freedom of establishment, Free movement of capital, Indirect taxes on the raising of capital, etc).

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