Is the destruction of the excise product, caused by the employee’s negligence, subject to excise duty?
C‑509/22. – Girelli Alcool Srl | In the case of using excise goods under customs control, the destruction or irreparable damage due to the negligence of an employee cannot be a taxable event.
In Case C-509/22, an employee of an alcohol-denaturing plant left the valve of an ethyl alcohol tank open, causing a significant amount of alcohol to spill out and either evaporate or become unusable. The manufacturer, citing unforeseeable circumstances and force majeure, requested the Italian customs authority not to levy excise duty for the shortage in the stored alcohol under excise suspension.
The customs authority rejected the request, stating that since the shortage resulted from careless behavior, it could not be considered either force majeure or an “unforeseeable circumstance”, and the missing quantity must be deemed as being released for free circulation. The Italian customs authority imposed over €17,000 in excise duty on the manufacturer, who disputed this both administratively and subsequently in court proceedings. The Court of Justice of the European Union was referred to for a preliminary ruling by the Italian Court of Cassation.
The Court of Justice of the European Union interpreted the relationship between “unforeseeable circumstances” and “force majeure“, and examined whether a shortage or damage occurring during the authorized use of excise goods by the customs authority could be considered as release for free circulation at all. In its judgment, the Court of Justice of the European Union clarified that “unforeseeable circumstances,” akin to force majeure, represent situations beyond the economic operator’s control that could not have been avoided even with the utmost diligence.
According to the court, events such as the leakage of the alcohol in question cannot be considered outside the responsibility of the operator, as they are consequences of failing to exercise the required level of care. However, the judgment also stated that destruction or damage of excise goods during a denaturing process pre-authorized by the customs authority does not constitute release for circulation. Member States may legislate to stipulate that destruction or irreparable damage of excise goods under excise suspension does not qualify as a release for circulation unless it results from a serious breach of obligations.
