Herbert Adams Pty Ltd v Federal Commissioner of Taxation
(1932) 47 CLR 222(1932) 2 ATD 31
(Judgment by: Starke J)
Herbert Adams Pty Ltd
v Federal Commissioner of Taxation
Judges:
Rich J
Starke J
McTiernan J
Dixon J
Evatt J
Subject References:
Taxation and revenue
Sales tax
Sponge cake
Pastry
Legislative References:
Sales Tax Assessment Act (No 1) 1930 (Cth) No 25 - s 20
Judgment date: 4 August 1932
Sydney
Judgment by:
Starke J
Sales tax is imposed upon the sale value of goods manufactured in Australia by a taxpayer and sold by him or applied to his own use, and the tax is payable by the manufacturer of the goods (Sales Tax Acts, No. 25 and No. 26 of 1930). By s. 20 of the Act No. 25, the tax is not payable upon the sale value of goods manufactured in Australia specified in the First Schedule. One of these items is: "Pastry but not including cakes or biscuits." The appellant manufactured a class of goods described in its return to the Commissioner of Taxation as "sponge." In the main, it is a mixture of eggs, sugar, flour, and water, and is baked either in round tins or as oblong blocks. The Commissioner assessed the appellant to sales tax in respect of the goods so manufactured. But the appellant claims that the sponge is "pastry" within the exemption contained in the Schedule and is not cake or biscuits. The learned Judge in the Court below (Mann J.) was of opinion that the sponge was not pastry within the commonly accepted meaning of that term, and he gave judgment for the Commissioner. Hence this appeal.
Words of common speech are, or are supposed to be, within the judicial knowledge, and should be "interpreted according to their common and ordinary meaning, namely, that which they bear in ordinary colloquial speech" (Falkiner v Whitton [F1] , at p. 110). But unfortunately the words in question here have no clearly defined meaning in ordinary speech. Indeed, the exemption itself-"pastry but not including cakes or biscuits"-indicates that the word "pastry" cannot be confined to articles of food made from paste or of which paste forms the essential part. Further, it is beyond doubt that the business of a pastry-cook is not confined to such articles: he manufactures and sells a large variety of small dainty goods, such as buns, cakes (plain and fruit), sponge slices, eclairs, etc, all of which pass in common speech under the denomination "pastry," but are not articles made from paste or of which paste forms an essential part. Again, the commercial understanding of the terms used in the Act confirms their use in common speech. It is often said that the denomination of articles enumerated in the revenue laws should be construed according to the commercial understanding of the terms because the law is addressed to persons engaged in trade or business. But I do not think the commercial understanding in this case differs, or is proved to differ, from that used in common speech. The trades of bread-making, pastry-cooking, and cake and biscuit-making overlap a good deal, and we find no clear line of demarcation between them. It is not surprising, therefore, that precise and mutually exclusive definitions of the terms bread, pastry, cake, and biscuits, do not exist. But it is beyond all doubt, from the trade evidence-including the books, catalogues, advertisements, etc, to which our attention has been called-that the manufacture of sponge falls within the range of the art of the pastry-cook, and that sponge is commonly denominated as pastry. Is it, however, in the form in which it is manufactured in the present case, within the description of pastry that is commonly and ordinarily known as cake? That question must be answered in the affirmative. The word "cake" is used to describe a small mass of various constituents such as flour, butter, sugar and other ingredients, baked or cooked in different shapes, e.g., round, in blocks, etc Butter or fatty substances are largely used, but a light cake is made without the use of fatty substances, or at all events with but little use of such substances. The sponge-cake is a wellknown representative of this last class of cake. The sponges in the present case, which were baked in round tins, are quite ordinary forms of cakes and are rightly described in the evidence as sponge-cakes. Those which were baked in blocks differ only in form, and the term "sponge-cakes" describes them more accurately than any other: they are an instance of a class of greater extent called cakes; the form depends upon the requirements of the customers of the trade, but is otherwise unimportant for the purposes of classification.
The appeal should be dismissed.