May a Member State restrict the year-end „strategic” stockpiling of cigarettes?

C‑96/22. – CIDL | It is in accordance with the EU law if a national regulation restricts the year-end “strategic” stockpiling of cigarettes through quantitative limits. However, in case of non-compliance, excise duty must be imposed based on the rules in force at the time of release into free circulation (and not later).

The plaintiff in this case is a tobacco trader in Madeira who admittedly exceeded more than three times the quantitative limit prescribed by Portuguese law. According to this law, during the last quarter of the year, the monthly quantity of cigarettes released into free circulation must not exceed 10% of the monthly average quantity released in the previous twelve months.

Portuguese legislation provides an exemption from the quantitative limit if the excess procurement is caused by a temporary, sudden increase in sales. In the plaintiff’s case, the local customs authority did not consider the exemption applicable and imposed an excise duty of €1.80 per cigarette for the quantity released into free circulation exceeding the prescribed limit. The tax authority calculated the payable tax based on the provisions in force at the time of tax imposition, as per the Portuguese excise law.

The plaintiff contested not the tax liability itself but argued that the Portuguese regulation did not comply with EU law. On the one hand, the plaintiff objected that the applicable tax rate should be the one in force at the time of release into free circulation, and on the other hand, they believed that the quantitative limit in question violated the principle of free movement of goods. The European Court pointed out that the EU Treaty allows for the exceptional restriction of the free movement of goods if it is justified by an overriding reason of public interest, and the protection of human health is recognized as such a reason in the Treaty.

The Portuguese legislator maintains the quantitative limit only in cases where the permitted quantity is exceeded not due to a sudden increase in sales. Thus, the restriction is aimed at preventing traders from accumulating stocks at the end of the year in anticipation of a visible increase in excise duty the following year, allowing them to offer harmful tobacco products at a more favorable price. However, the court’s position is that it violates EU law if a Member State applies the tax rate not at the time of release into free circulation but at a later date (at the time of tax imposition).