The marking of gas oil subject to full taxation is in conflict with Directive 95/60/EC

On the 17th of June 2011, the United Kingdom received a letter of formal notice from the European Commission, which stated that the practice of the United Kingdom, to authorise the use of marked gas oil as fuel for the propulsion of private pleasure craft, subject to the owner of the craft concerned making a declaration and paying the additional excise duty, was in conflict with the obligations of the Directive 95/60 on fiscal marking of gas oils and kerosene.

Directive 95/60/EC was created by the European Union on 27 November 1995 in order to establish common rules on the fiscal marking of gas oils and kerosene, which are not subject to the standard rate of excise duty on mineral oils used as motor fuels.

Under Article 1 of the Directive, Member States are obliged to treat fuel subject to a reduced rate of excise duty with a marker. In this way, fuels that are fully subject to the generally applicable rate can easily be distinguished from those marked.

The European Commission stated that Article 3 of this Directive, which requires Member States to prevent the misuse of marked products, prohibits the use of a fiscal marker on fuels taxed at full rate, while the United Kingdom allows the use of a marked oil as fuel for the propulsion of private pleasure craft, while its use is subject to the full rate of excise duty.

The question was then raised before the Court of Justice as to the extent to which the Directive precludes the marking of a fuel, which in practice is in fact subject to the excise duty in force, without any exemption or reduction in excise duty having been granted to it.

In its judgment of 17 October 2018, the Court of Justice supported the view of the European Commission that the purpose of Directive 95/60/EC is indeed to provide common rules for Member States which allow fuels which benefit from a reduced rate of excise duty to be easily distinguished from unmarked fuels, which are subject to the full rate. A Member State which is also going to use such marker fuels for gas oil subject to full taxation thus runs counter to the objective of the directive.

The Court held that a national practice allowing the use of marked gas oil for private pleasure craft – subject to payment of the additional excise duty – is in conflict with the objective of Directive 95/60, in which the United Kingdom has failed to fulfil its obligations under Article 3 of that directive, which requires Member States to take the necessary measures to prevent the unlawful use of marked products.