The impact of this case on ATO policy is discussed in Decision Impact Statement: Hornsby Shire Council and Commissioner of Taxation (2007/5657).
HORNSBY SHIRE COUNCIL v FC of TJudges:
GD Walker DP
J Block DP
Administrative Appeals Tribunal, Sydney
MEDIA NEUTRAL CITATION:
 AATA 1060
GD Walker, J Block (Deputy Presidents)
Part A - Background
1. The objection decision under review is the disallowance of an objection by the applicant (the council) dated 29 June 2007 against its GST assessment in respect of the month ending 31 January 2004 (see T183 and T184).
2. Messrs David McGovern SC and Ian Young of counsel instructed by Mr Ian Woodward of Storey & Gough Lawyers appeared for the applicant, while Messrs Alan Robertson SC and Bradley Jones of counsel instructed by Mr Stephen Jones of Maddocks Lawyers appeared for the respondent (the commissioner).
3. There was no oral evidence before the tribunal and the application was argued on the papers before the tribunal over two days, 22 and 23 October 2008.
4. The documents before the tribunal comprised the documents produced pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (the T documents), taken into evidence as Exhibit R1. We propose however to refer where relevant to the T documents by reference to a "T" followed by a number which in turn relates to the page number in the T documents.
5. The tribunal also admitted into evidence other documents tendered by the applicant at the hearing as follows:
|Exhibit A1:||An affidavit by James Farrington dated 10 July 2008. It must be noted that Exhibit A1 includes a large number of its own exhibits or annexures contained in a bound volume marked JF1 with documents separated by tabs and numbered from 1 to 100 inclusive. The tribunal intends to refer where relevant to the tabbed parts of JF1 by reference to "JF" followed by a number and where the number in turn refers to the tab number in JF1 (and which is as set out previously, an exhibit to Exhibit A1).|
|Exhibit A2:||An affidavit by James Farrington dated 20 October 2008;|
|Exhibit A3:||A picture of the quarry (as defined later in these reasons);|
|Exhibit A4:||A bundle of documents produced under summons and including inter alia a document entitled "Points of Defence" filed on behalf of the applicant in case number 40177 of 2001 in the Land and Environment Court of New South Wales brought by CSR Limited (CSR) against the applicant, a document indicating that $25,000 was paid for the surrender of an easement, a Transfer Releasing Easement numbered 8371886D and also (and being the last document in Exhibit A4) a document entitled Property Report (No 1822) dated 31 January 2002 and which commences with a paragraph reading as follows:|
|The property owners CSR Limited have requested the release of a redundant easement for electricity for transmission line registered dealing no G37897 Folio Identifier Lots A & B DP318676 & Part Portion 75 in Volume 2169 Folio 187.|
6. Each of the parties furnished the tribunal with helpful and detailed written submissions. The applicant's written submissions in their final and amended form are referred to as "AS" while the respondent's written submissions are referred to as "RS". The tribunal has drawn on the written submissions to some considerable extent for the purposes of these reasons. In including passages from the submissions, the tribunal has deleted references to footnotes and the footnotes themselves.
7. The objection decision under review turns squarely and only on whether the applicant was entitled in respect of its acquisition of the Hornsby quarry to an input tax credit. The terms "the Hornsby quarry" or "the quarry" refers to certain land at Hornsby being Lots A, B, D, and E in deposited plan 318676 being the whole of the land in Certificate of Title Auto Consol 10454 - 127 and part of Portion 75 and Lot 1 in Deposited Plan 926103 being the whole of the subject land in Certificate of Title Volume 2169 Folio 187.
8. This application is one in which test case funding was provided by the respondent; the tribunal was advised that this application might not end with this decision and it is for that reason that the tribunal intends (drawing on AS to some considerable extent for this purpose) to include some considerable detail in respect of the factual background. It is also relevant to note that the applicant's argument was in broad terms divided into three sections (more fully referred to later in these reasons). The tribunal considers that it is able to decide this matter under the second of the three sections. It intends, in case it can be said that it is in error in respect of that section and because it is for other reasons desirable that it do so, to deal although in briefer terms, with the first and third sections.
Part B - The issue
9. There is in reality only one issue between the parties and that is as to whether in respect of the compulsory acquisition of the quarry from CSR by the applicant, there was a "supply" within s 9-10 of A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the GST Act). We refer in this context to clause 1 of RS headed "the Issue" reading as follows:
The main issue in this Application is whether the compulsory acquisition by the Applicant of a quarry owned by CSR Limited was a 'supply' under s.9-10 of the A New Tax System (Goods and Services Tax) Act 1999 ( 'GST Act' ). If the issue is decided in the affirmative, then the Respondent accepts that the supply was a taxable supply and the Applicant is entitled to an input tax credit.
10. The respondent described the material facts in clauses 2 to 6 of RS as follows:
- 2. Until 25 October 2002, CSR Limited was the owner of the Hornsby Quarry. It is not in dispute that the land on which the quarry was located was rezoned by the Applicant in 1994 as 'Open Space A (Public Recreation Land)' under the Hornsby Local Environmental Plan 1994 ( 'LEP' ).
- 3. Clause 17(5) of the LEP provided that the Applicant must acquire land owned by a person zoned 'Open Space A (Public Recreation-Local)' if the owner requests so in writing. CSR made such a request.
- 4. On 24 October 2002 the Land and Environment Court ordered by consent that the Applicant publish a notice of compulsory acquisition of land in the New South Wales Government Gazette pursuant to s.19 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) ( 'Land Acquisition Act' ). The notice was published in the Gazette on 25 October 2002.
- 5. On 24 February 2003 the Valuer-General determined the amount of compensation at $25,099,500. The Council subsequently paid $26,508,771.28 to CSR in compensation for the divestment of the quarry and has claimed an input tax credit of $2,409,888 being 1/11th of that amount.
- 6. The sum of $26,508,771.28 comprised the following amounts:
- (a) $25,000,000 (market value of the land as determined by the Valuer General);
- (b) $99,500 (loss attributable to disturbance as determined by the Valuer General); and
- (c) $1,409,271.28 (interest under s.49 of the Land Acquisition Act).
11. The applicant described the relevant facts in far more detail; clauses 9 to 59 of AS read as follows:
- 9. The Applicant is the Shire Council duly incorporated and established for a public purpose by or under a law of the State of New South Wales.
- 10. Since the date of its incorporation the Applicant has carried on activities in the form of a business or in the form of an adventure or concern in the nature of trade.
- 11. In the period from at least January 2001 until December 2004 ('the relevant period') the Applicant engaged in activities in the form of a business or in the form of an adventure or concern in the nature of trade.
- 12. CSR Limited ('CSR') is a company duly incorporated and during the relevant period CSR carried on activities in the form of a business or in the form of an adventure or concern in a nature of trade.
- 13. During the relevant period the Applicant was registered as required by the GST Act.
- 14. During the relevant period CSR was required to be registered or was registered under the GST Act.
- 15. At all material times CSR was the registered proprietor of an estate in fee simple in land being all that piece or parcel of land situated at Hornsby being Lot A, B, C, D and E in Deposited Plan 318676 being the whole of the land in Certificate of Title Auto Consol 10454 - 127 and part of Portion 75 and Lot 1 in Deposited Plan 926103 being the whole of the subject land in Certificate of Title Volume 2169 Folio 187 (hereinafter 'the subject land').
- 16. At all material times CSR carried on operations on the subject land as a blue metal quarry.
- 17. On 22 July 1994 the subject land was zoned Open Space A (Public Recreation - local) under the Hornsby Shire Local Environmental Plan 1994.
- 18. Clause 17(5) of the LEP placed an obligation on Council to acquire privately owned land zoned Open Space A on receipt of a request in writing to do so.
- 19. On 22 March 2001 CSR wrote to the Applicant referring the Applicant to Clause 17(5) of the Hornsby LEP and requiring the Applicant to acquire the subject land.
- 20. On 21 May 2001 CSR wrote to the Applicant referring to its request that the Applicant acquire the subject land and notifying the Applicant that valuers had advised CSR that the value of the subject land was $29 million.
- 21. On 25 May 2001 CSR wrote a further letter to the General Manager of the Applicant referring to its letter of 22 March 2001 and advised that it confirmed CSR's wish that the Applicant acquire the subject land.
- 22. On 30 May 2001 the Applicant's solicitors Abbott Tout wrote to CSR advising that the subject land had not been exclusively reserved as referred to in section 26(1)(c) of the Environmental Planning & Assessment Act and accordingly that CSR could not compel the Applicant to acquire the subject land.
- 23. On 6 June 2001 Minter Ellison on behalf of CSR wrote to the Applicant's solicitors indicating that Class 4 Proceedings in the Land and Environment Court would be commenced by CSR unless the Applicant agreed to purchase the subject land.
- 24. On 16 July 2001 Abbott Tout Solicitors for the Applicant wrote to Minter Ellison for CSR advising the Council had received formal advice from Mr M H Tobias QC that it was not obliged to acquire the subject land owned by CSR or any part thereof.
- 25. On 14 August 2001 CSR's representative, Mr McKenzie, was advised at a meeting with the Applicant's Mayor, General Manager and Chief Town Planner that the Applicant had received legal advice and was not going to buy the subject land.
- 26. On 11 September 2001 Mr McKenzie of CSR wrote to the Applicant advising CSR had instructed Minter Ellison to commence Class 4 Proceedings in the Land and Environment Court seeking declaration and orders requiring the Applicant to acquire the subject land in accordance with Clause 17(5) of the LEP.
- 27. Deleted.
- 28. On 12 September 2001 the Applicant wrote to Mr McKenzie of CSR advising it was under no obligation to acquire the subject land and making a request that Acquisition Notices be withdrawn.
- 29. On 27 September 2001 CSR commenced proceedings in the Land and Environment Court seeking a declarations and orders that the Applicant acquire the subject land in accordance with Clause 17(5) of the LEP.
- 30. On 2 October 2001 the Applicant obtained supplementary legal opinion from Murray Tobias QC (as he then was) advising that the Applicant was required to acquire the subject land and that the real issue in dispute would be the assessment of compensation.
- 31. On 10 October 2001 the Applicant obtained legal opinion from John Ayling SC stating that Clause 17(5) of the LEP is 'regular and valid and the obligation it creates must, as a matter of law, be complied with ... Council is obliged to acquire the properties.'
- 32. On 15 October 2001 the Executive Manager Planning Division of the Applicant sent a memorandum to all Councillors concerning the opinion of Murray Tobias QC (as he then was) and the opinion of John Ayling SC including that 'in consequence Council will not contest CSR Limited's motion before the Land and Environment Court for Council to acquire, but it will contest the $29 million value that CSR attributes to those properties.'
- 33. On 31 October 2001 CSR filed Points of Claim and an Affidavit of Andrew McKenzie in the Class 4 Proceedings in the Land and Environment Court.
- 34. In November 2001 the Applicant filed Points of Defence in the Land and Environment Court to the Class 4 proceedings commenced by CSR.
- 35. On 28 February 2002 Consent Orders were executed by the Applicant and CSR in the Land and Environment Court requiring the Applicant with due expedition to do all things and execute all documents which were necessary and proper for it to do to acquire the subject land.
- 36. On 21 March 2002 Minter Ellison on behalf of CSR wrote to Abbott Tout on behalf of the Applicant requesting a copy of the request made by the Applicant as required by Order 2 of the Court's Orders seeking approval of the Minister for Local Government pursuant to section 187(2) of the Local Government Act 1993 to give a proposed acquisition notice under section 11 of the Land Acquisition (Just Terms Compensation) Act 1991 ('the Act').
- 37. On 25 March 2002 Minter Ellison again wrote a letter to Abbott Tout drawing attention to the requirements of Order 2 of the Court's Orders.
- 38. On 27 March 2002 the Applicant by its General Manager R J Ball wrote to the Minister for Local Government pursuant to section 187 of the Local Government Act 1993 seeking approval for the giving of a proposed Acquisition Notice under the Act to CSR.
- 39. On 9 May 2002 the Director General of the Department of Local Government wrote to Mr R J Ball General Manager of the Applicant advising that pursuant to Section 187(2) of the Local Government Act 1993 the Minister had approved the Applicant giving a proposed acquisition notice under the Act in respect of the subject land, and in addition, pursuant to section 19 of the Act, the Governor had approved of the Applicant declaring by notice that the subject land had been acquired by compulsory process.
- 40. On 16 May 2002 CSR wrote to the General Manager of the Applicant requesting that the process to resume the land be shortened to thirty (30) days and seeking an indication when CSR would receive formal notice from the Applicant confirming the Governor's approval.
- 41. On 12 June 2002 Andrew McKenzie on behalf of CSR contacted Robert Ball of the Applicant to inquire when Council would formally issue a Notice of Intention to acquire the subject land.
- 42. On 13 June 2002 Peter Hinton on behalf of the Applicant sent an email to Andrew McKenzie of CSR advising the Applicant's solicitors had issued a letter of resumption to CSR on 12 June 2002.
- 43. On 13 June 2002 Andrew McKenzie on behalf of CSR sent an email to Peter Hinton of the Applicant advising CSR required a formal notice from the Applicant to CSR that the Applicant proposed to resume the subject land.
- 44. On 26 June 2002 Andrew McKenzie on behalf of CSR sent an email to Peter Hinton of the Applicant advising that CSR had not yet received formal Notice of Intention to resume.
- 45. On 8 July 2002 CSR was sent a proposed Acquisition Notice advising the Applicant intended to acquire the subject land and that Acquisition Notices would be published in the Government Gazette not less than ninety (90) days after giving the notice. Further the Acquisition Notice advised CSR's interest in the subject land would be extinguished and converted into a claim for compensation and that the Acquisition Notice would vest the subject land in the Applicant freed of all interests.
- 46. On 16 August 2002 CSR completed a claim for compensation for $29,500,000.
- 47. On 4 October 2002 CSR filed a Notice of Motion in the Land and Environment Court moving the Court for Orders that the Applicant publish in the Gazette Notice a notice pursuant to section 19 of the Act.
- 48. On 24 October 2002 Consent Orders were filed in the Land and Environment Court requiring the Applicant to cause to be published a Notice of Compulsory Acquisition of the subject land pursuant to section 19 of the Act in Government Gazette on 25 October 2002.
- 49. On 25 October 2002 Notification was published in New South Wales Government Gazette that the Applicant compulsorily acquired the subject land.
- 50. By reason of being dispossessed of the subject land CSR suffered loss and became entitled to compensation, including compensation for disturbance and the special value the subject land had to CSR.
- 51. CSR lodged a claim for compensation inter alia for disturbance and loss of the special value of the subject land to CSR.
- 52. The Applicant gave CSR written notice of entitlement to compensation in the amount of compensation offered as determined by the Valuer General being an amount including an amount in respect of GST.
- 53. On 2 April 2003 the Applicant and CSR executed a Deed of Release pursuant to which in consideration of the payment of compensation plus statutory interest CSR as releasor, released the Applicant and its successors and assigns from any claims for compensation, causes of action, damages, costs expenses and interest, other than interest payable in accordance with section 49 of the Act.
- 54. On 24 November 2003 CSR and the Applicant executed Consent Orders requiring the Applicant to give CSR written notice of compensation entitlement and offer of compensation in accordance with the amount determined by the Valuer General on 24 February 2003, as required by section 42 of the Act.
- 55. On 10 December 2003 CSR accepted the Applicant's offer of compensation in the sum of $26,308,195 on the terms of the enclosed Deed of Release.
- 56. On 22 December 2003 CSR sent a letter to the Applicant enclosing the Certificate of Title for the subject land.
- 57. On 23 December 2003 CSR forwarded to the Applicant the remaining land titles held by CSR.
- 58. On 30 January 2004 the Applicant made payment of $23,965,741 to the Applicant.
- 59. On 4 November 2004 the Applicant made payment of 2,543,030.28 to CSR.
12. Mr Robertson on behalf of the respondent agreed that, subject to only one exception, the description by the applicant of the relevant facts can be accepted as accurate. The exception to which Mr Robertson referred related to clause 17 of AS: Mr Robertson contended that it should be read as if it were amplified by the inclusion of the words "by the Council" after the word "local" in the second line. The applicant accepted that amendment. Mr Robertson also contended that the only events that were relevant in this context were those which preceded the compulsory acquisition of the quarry and which occurred when notice was published in the New South Wales Government Gazette on 25 October 2002: see clause 49 of AS quoted earlier in these reasons.
13. For the sake of completeness we should note that Mr Robertson raised three objections on grounds of relevance in respect of Exhibit A1. Since there was in reality no dispute on the facts, it is not necessary to refer to those objections further.
14. The quantity of material furnished to the tribunal is large, consisting of a number of bound volumes but, as Mr Robertson noted, a considerable part of the material before the tribunal is of limited relevance.
Part C - The three sections
15. Mr McGovern argued the applicant's case, as we have said, in three sections. In respect of the "first section", he argued that there can be a supply within s 9-10 of the GST Act even where the person from whom the relevant property is acquired does not perform any action of any kind in respect of that acquisition. Where by way of illustration an authority resumes a part of a person's land, perhaps (and by way of example only) for road-widening purposes, there will, Mr McGovern argued, be a supply even if the land owner resists or opposes the resumption. This section is referred to in these reasons as the first section; it may be said that it relates in the main to s 9-10(1) of the GST Act.
16. In respect of the "second section", Mr McGovern noted that the term "supply" is cast in very wide terms. Section 9-10(1) provides that the term "supply" is any form of supply whatever and that subsection is then expanded in s 9-10(2) of the GST Act, and in particular having regard to sub-paragraphs (d) and (g). The applicant's case in respect of the second section relates in the main to ss 9-10(2)(d) and (g) of the GST Act.
17. Mr. McGovern's contention, reduced to its essentials, was that CSR was by no means a passive or even resisting party in respect of the acquisition of the quarry. It was, in stark contrast, an active or driving party which took the steps that resulted in the acquisition of the quarry by the applicant (and where the applicant was at first a resisting party). Put in simple terms, his argument was that CSR exercised a right analogous to a statutory put option, of which required the applicant to acquire the quarry and so that when it did so, its actions in that regard fell within sub-paragraph (g) of s 9-10(2) of the GST Act. Mr Young at a later stage furnished the tribunal with dictionary definitions of the word "surrender", having regard to the provisions of sub-paragraph (d) of s 9-10(2) of the GST Act.
18. The "third section" refers to the Deed of Release which is referred to in clause 53 of AS. On 2 April 2003, the applicant and CSR executed a Deed of Release: the applicant contended that there was a supply within s 9-10(2) when the applicant executed the Deed of Release (specifically 9-10(2)(e), 9-10(g) and 9-10(h).
19. The tribunal was furnished with references to a large number of decided cases, some decided in other countries, in particular the United Kingdom, New Zealand and the Republic of South Africa. We intend to refer to some but by no means all of the cases cited. The respondent conceded that if there was a supply within s 9-10 of the GST Act, the applicant is entitled to an input tax credit. The respondent did not otherwise raise as an issue the fact that CSR did not furnish the respondent with a tax invoice; (we have previously referred to clause 1 of RS).
20. Words and phrases contained in these reasons and which are defined in the extracts from AS and RS quoted earlier in these reasons have, unless the context otherwise requires, the same meanings when used in these reasons.
Part D - Relevant statutory provisions
21. Section 9-5 of the GST Act provides:
You make a taxable supply if:
- (a) you make the supply for consideration; and
- (b) the supply is made in the course or furtherance of an enterprise that you carry on; and
- (c) the supply is connected with Australia; and
- (d) you are registered, or required to be registered.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
22. Section 9-10 of the GST Act provides:
Meaning of supply
- (1) A supply is any form of supply whatsoever.
- (2) Without limiting subsection (1), supply includes any of these:
- (a) a supply of goods;
- (b) a supply of services;
- (c) a provision of advice or information;
- (d) a grant, assignment or surrender of real property;
- (e) a creation, grant, transfer, assignment or surrender of any right;
- (f) a financial supply;
- (g) an entry into, or release from, an obligation:
- (i) to do anything; or
- (ii) to refrain from an act; or
- (iii) to tolerate an act or situation;
- (h) any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).
- (3) It does not matter whether it is lawful to do, to refrain from doing or to tolerate the act or situation constituting the supply.
23. Section 11-20 of the GST Act provides:
Who is entitled to input tax credits for creditable acquisitions?
You are entitled to the input tax credit for any creditable acquisition that you make.
24. Section 11-5 of the GST Act defines the term "creditable acquisition":
What is a creditable acquisition?
You make a creditable acquisition if:
- (a) you acquire anything solely or partly for a creditable purpose; and
- (b) the supply of the thing to you is a taxable supply; and
- (c) you provide, or are liable to provide, consideration for the supply; and
- (d) you are registered, or required to be registered.
The respondent does not dispute that the applicant satisfied ss 11-5(a), (c) and (d) of the GST Act; the respondent therefore conceded (as set out previously) that if the acquisition of the quarry was a "taxable supply", the applicant is entitled to an input tax credit for the consideration paid for that supply.
Part E - Other relevant statutory provisions
25. Section 26(1) of the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act) (omitting all sub-paragraphs other than sub-paragraph (c)) reads as follows:
Contents of environmental planning instruments
- (1) Without affecting the generality of section 24 or any other provision of this Act, an environmental planning instrument may make provision for or with respect to any of the following:
- (c) reserving land for use for the purposes of open space, a public place or public reserve within the meaning of the Local Government Act 1993 , a national park or other land reserved or dedicated under the National Parks and Wildlife Act 1974 , a public cemetery, a public hospital, a public railway, a public school or any other purpose that is prescribed as a public purpose for the purposes of this section,
26. Section 27 of the EPA Act provides as follows:
Owner-initiated acquisition of land reserved for public purposes
- (1) An environmental planning instrument that reserves land for use exclusively for a purpose referred to in section 26 (1) (c) must specify an authority of the State that will be the relevant authority to acquire the land if the land is required to be acquired under Division 3 of Part 2 of the Land Acquisition (Just Terms Compensation) Act 1991.
- (2) Section 21 of the Land Acquisition (Just Terms Compensation) Act 1991 applies for the purposes of determining whether an environmental planning instrument reserves land for use exclusively for a purpose referred to in section 26 (1) (c).
- (3) An environmental planning instrument (whenever made) is not to be construed as requiring an authority of the State to acquire land, except as required by Division 3 of Part 2 of the Land Acquisition (Just Terms Compensation) Act 1991.
- (4) Subsection (3) applies despite:
- (a) any provision of an environmental planning instrument (whenever made) to the contrary, or
- (b) the service of a notice to acquire the land on an authority of the State on or after the day on which notice was given in Parliament for leave to introduce the Bill for the Environmental Planning and Assessment Amendment (Reserved Land Acquisition) Act 2006.
27. Clause 17(5) of the Hornsby Shire Local Environmental Plan (the LEP) reads as follows:
The owner of land in the Open Space A (Public Recreation - Local) zone may request, in writing, the Council to acquire the land. On receipt of the request, the Council must acquire the land.
28. Clause 17(8) of the LEP entitled "Interim Development" provides as follows:
The Council may, with the concurrence of the public authority responsible for acquisition of the land, consent to any development of land zoned Special Uses B (Transport Corridor), or Open Space A (Public Recreation - Local) or Open Space B (Public Recreation - District) if the land has not been acquired by the public authority responsible for acquisition of the land. In determining whether to grant concurrence, the public authority shall take into consideration the effect of the proposed development on the costs of acquisition, the imminence of acquisition and the costs of reinstatement of the land for the purposes for which the land is to be acquired.
29. Section 20 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the LAA) provides:
Effect of acquisition notice
- (1) On the date of publication in the Gazette of an acquisition notice, the land described in the notice is, by force of this Act:
- (a) vested in the authority of the State acquiring the land, and
- (b) freed and discharged from all estates, interests, trusts, restrictions, dedications, reservations, easements, rights, charges, rates and contracts in, over or in connection with the land.
30. Section 37 of the LAA provides:
Right to compensation if land compulsorily acquired
An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land.
31. There are some other statutory provisions set out in AS and quoted previously in these reasons, some of which are referred to later in these reasons but where it is unnecessary to recite their provisions in full. It is sufficient to note that it is clear that when CSR exercised its rights under clause 17(5) of the LEP, the applicant became obliged to acquire the quarry and to pay compensation. There are a number of statutory provisions concerning the manner in which the compensation is, in the absence of agreement, to be computed and including as to the need in certain circumstances for a valuation by the Valuer-General; we do not think it necessary to refer to those provisions in detail. As the extract from AS quoted previously in these reasons makes clear, CSR exercised its rights to require the applicant to acquire the quarry. The applicant was by no means a willing acquirer; it raised as a defence the fact that there was an easement and that aspect was dealt with when a payment was made to terminate the easement. Litigation as described in AS cited earlier in these reasons was instituted in the Land and Environment Court on a number of occasions land, in particular as to the amount to be paid by way of compensation. Eventually the quarry was acquired by the applicant and compensation was paid.
Part F - The second section
32. Under clause 17(5) of the LEP, CSR had the right to require the applicant to acquire the quarry. CSR was not obliged to exercise its rights under clause 17(5); as one possible alternative, it might have exercised its rights under clause 17(8) of the LEP. Once CSR exercised its rights under clause 17(5) of the LEP, however, the effect of the second sentence of that section was that the applicant was obliged (whether or not it wished to do so) to acquire the quarry.
33. In fact, as appears from AS quoted earlier in these reasons, the applicant did not wish to acquire the quarry and at first contended that it was not obliged to do so. It raised as a defence the existence of the easement referred to above. Eventually, and in consequence of actions instituted by CSR in the Land and Environment Court the applicant did in fact acquire the quarry. It did so by publishing a notice the New South Wales Government Gazette (the Gazette); in accordance with s 20 of the LAA and on the date of that publication the quarry vested in the applicant.
34. It is clear enough that the quarry vested in the applicant in consequence of the publication of the notice in the Gazette. Put in other words, formal transfer of title took place by virtue of publication of that notice. We were advised during the course of the hearing that at some point in time CSR delivered the title deeds to the applicant, but whether that occurred before or after publication of the notice was not clarified. Moreover we did not understand either party to be contending that delivery of the title deeds was necessary in order to transfer title.
35. Mr Robertson contended that the legal actions instituted by CSR in the Land and Environment Court were no more nor less than mandamus actions pursuant to which the applicant was compelled to acquire the quarry and to pay compensation for it. The history (sufficiently detailed in AS quoted previously in these reasons) indicates that the applicant initially opposed the acquisition of the quarry.
36. Mr Robertson contended that the notice given by CSR under clause 17(5) of the LEP did not constitute a disposal of an interest in property in any relevant sense and that CSR, having given that notice, could if it so desired have sold the quarry thereafter to a third party. He contended in particular that injunctive relief would not have been available to the applicant if CSR having given notice under clause 17(5) had purported to sell the quarry to a third party.
37. Mr Robertson contended also that once CSR had given notice in terms of clause 17(5) of the LEP, it was material and relevant that CSR could not then know whether compensation would be payable by mutual agreement or in accordance with the statutory regime which then applied and in the exercise by CSR of the statutory remedies which were available to it. Mr Robertson's contention was that the acquisition took place in consequence of the publication of the notice in the Gazette and that what occurred before the publication, and in particular the giving of the clause 17(5) notice (and the events and actions which followed the giving of that notice), did not confer a sufficient or relevant nexus in respect of the acquisition of the quarry by the applicant.
38. We agree with the applicant's contentions (in response to those by the respondent) that the giving of the notice pursuant to clause 17(5) of the LEP was the driving force which resulted in the end (and having regard to the fact that legal action was necessary in order to enable CSR to enforce its rights) in the acquisition of the quarry by the applicant. CSR having given that notice under clause 17(5) of the LEP was not free to do anything other than obtain compensation for the quarry. The fact that it was obliged to avail itself of statutory remedies in order to obtain the compensation to which it was entitled is not to the point. Having given that notice, CSR could not have sold the quarry to a third party. Had it purported to do so, the applicant in our view would have been entitled to injunctive relief. It is necessary in our view in this context to have regard to the giving of the notice pursuant to clause 17(5) and also to the numerous events that followed, in other words to the complete factual matrix pursuant to which the applicant acquired the quarry and paid compensation for it. The applicant in our view aptly described the giving of the notice pursuant to clause 17(5) as equivalent to the exercise of a statutory put option. We referred earlier in these reasons by way of illustration to an example of a resumption for road-widening purposes where the owner of the land resumed is an unwilling party. In this case, CSR was the very antithesis of an unwilling party. It was CSR, which against opposition compelled the finalisation of the acquisition and the payment of compensation.
39. As noted previously, we were furnished with a whole host of authorities. In our view the judgment of the Full Federal Court in
Westley Nominees Pty Ltd & Anor v Coles Supermarkets Australia Pty Ltd & Anor (2006) 152 FCR 461 might be said to have been of particular assistance. The basic facts are set out in paras  and  of Westley at p464 as follows:
- " Coles Supermarkets Australia Pty Ltd (Coles) leases a supermarket at Greenslopes near Brisbane. The lease was originally granted by Lake Eerie Pty Ltd to Coles Myer Ltd (CML). Lake Eerie sold the freehold to the present appellants. Shortly afterwards CML assigned its lease to Coles.
-  The first question is whether the appellants' acquisition of the property subject to the existing lease constituted a 'supply' within the meaning of s 9-10 of the A New Tax System (Goods and Services Tax) Act 1999 Cth (the GST Act). The learned primary judge (Kenny J) answered that question in the affirmative:
Coles Supermarkets Australia Pty Ltd v Westley Nominees Pty Ltd (2005) 60 ATR 52.
40. Paragraphs  to  at pp466-467 of Westley read as follows:
-  In response, Coles submitted that the definition of supply in s 9-10(1) and (2) is adequate to encompass the obligation, assumed by a landlord upon acquiring a reversionary estate, to continue to provide exclusive possession to a lessee, notwithstanding that the original grant has been conferred by the landlord's predecessor in title. According to its submission, it is well established as a matter of property law that the obligation to permit quiet enjoyment of the demised property runs with the land and burdens any assignee of the reversion. The obligation runs because it relates to the land and by reason of the privity of estate that exits between lessor and lessee:
Manchester, Sheffield and Lincolnshire Railway Co v Anderson at 402-403 per Chitty LJ. Thus, it was submitted, the lessee's continued entitlement in a legal sense to possession of the land is as against the new owner who acquires subject to that obligation and who derives the benefit of the entitlement to rent which passes, in this case, pursuant to s 117 of the Property Law Act 1974 Qld.
-  Coles submitted that there was a 'supply' within s 9-10(1) as found by her Honour below; alternatively, there was a 'supply' within para (g) of s 9-10(2).
-  The Commissioner made similar submissions to Coles but arguably went further in contending that a supply can be 'a legal consequence', not requiring a conscious or deliberate act on the part of the supplier. In this sense, one might have a supply which arises by operation of law.
-  The concept of 'supply' in its ordinary meaning in s 9-10(1) of the GST Act does seem to require some act of provision, furnishment, conferral or giving of some thing. The inclusions in s 9-10(2) specifically identify some of these things, without limitation to subs (1), as goods, services, advice or information, real property and any right, (paras (a) to (e) inclusive). On the other hand, the concept of 'financial supply' in para (f) is defined in the A New Tax System (Goods and Services Tax) Regulations 1999 Cth (reg 40-5.09) to include, amongst other things, the acquisition of an interest in or under specified financial instruments and para (g) extends the concept of 'supply' to include the entry into an obligation to do something, to refrain from doing something or to tolerate an act or situation. For these reasons, the ordinary meaning of 'supply' is arguably extended by paras (f) and (g), if not by paras (a) to (e) inclusive.
41. We include paras  and  at p468 of the Westley judgment as follows:
-  While the matter is not entirely free from doubt, we have concluded that when the appellants purchased the reversion they assumed the obligation of Lake Eerie to honour the lease according to its terms and in that sense entered into an obligation to tolerate an act or situation and in consequence, made a 'supply' by virtue of s 9-10(2)(g). The fact that the obligation arises by operation of law does not, in our view, impede this conclusion; after all, the reference to 'obligation' in s 9-10(2)(g) must be a legal obligation, although not necessarily one sourced in contract.
-  In the circumstances, it is unnecessary for us to determine whether there is a 'supply' by way of lease of the exclusive possession of the demised property in accordance with the lease' as her Honour below concluded in reliance on the ordinary meaning of the word 'supply' in s 9-10(1). However, the indications discussed at  tend to point away from that construction.
42. The Full Court in Westley held that the purchase of the reversion by the appellant amounted to an assumption by them of the obligations of Lake Eerie to honour the lease, and falling within s 9-10(2)(g) of the GST Act. In this case it is our view that CSR, when it gave notice pursuant to clause 17(5) of the LEP, incurred legal obligations. For that reason, we have come to the conclusion that in doing so, it made a supply within s 9-10(2)(g) of the GST Act. We do not accept the respondent's argument that there was no relevant nexus between the giving of notice and the acquisition; on the contrary the former act drove and in the end resulted in the latter.
43. The Full Court also inclined to the view (but in terms which were obiter) that the relevant supply probably did not fall within s 9-10(1) of the GST Act (Westley at para 23).
44. We refer also in this context and in relation to the second section to the ex tempore judgment of Talbot J in
Fidler v Port Stephens Council BC9606976 (24 September 1996). The fourth and fifth paragraphs on page 1 and also the third last and penultimate paragraphs on page 2 of that Land and Environment Court judgment read as follows:
Cl28 of the LEP applies to land within the 6(a) zone and provides that the owner of any such land may, by notice in writing, require the council to acquire the land. In subcl3 of cl28 the council is directed, subject to cl4, on receipt of a notice to, in effect, acquire the land. Subcl4 for present purposes does not appear to have any relevant application.
It is not in issue in these proceedings that the Court may regard the obligation under subcl3 of cl28 as being an obligation to acquire the land either by private treaty following negotiation or by compulsory acquisition. Mr Kildea has taken some trouble to carefully take the Court through what might be the relevant provisions of the Land Acquisition (Just Terms Compensation) Act and I am satisfied that there is nothing in that Act which bears upon the manner in which cl28 should be construed. To that extent the parties are, in a sense, ad idem.
I have been assisted by the reference, by both parties, to the decision of the New South Wales Court of Appeal in
Parramatta City Council v Sandell (1973) 1 NSWLR 151. Although that decision was made in 1973, there are a number of principles which are discussed in the course of the judgments delivered by the members of the Court which assist with some degree of benefit and guidance in reaching a proper conclusion in the present case.
The Court, particularly in the judgment of Mr Justice Hutley, appeared to recognise in some obiter remarks, for example at p168, that a person who had pursuant to the terms of a planning scheme ordinance required a council to acquire their land did obtain something in the nature of a right to proceed to obtain an order to compel the council to compulsorily acquire the land by resumption.
45. We consider that the judgments in Fidler and
Parramatta City Council v Sandell  1 NSWLR 151 (referred to in Fidler) support the view that when it gave notice requiring the applicant to acquire the quarry, CSR entered into legal obligations. In Fidler Talbot J referred to the legal obligations of the council to acquire the land and to pay compensation. It must follow that if the council was obliged to acquire the land from the owner, the owner was under a legal obligation in respect of that land. Mr Robertson's contention that the giving of notice did not relate to a relevant property interest and that there was therefore no relevant nexus between the notice given pursuant to clause 17(5) of the LEP and the notice in the Gazette cannot be correct.
46. The tribunal was furnished with dictionary definitions of the term "surrender". In this regard:
- (a) The Macquarie Dictionary defines
Surrender ... 1. to yield (something) to the possession or power of another; deliver up possession of (something) upon demand or compulsion: to surrender a fort. 2. to give (oneself) up, especially as a prisoner or to some emotion, course of action, or the like. 3. to give up, abandon, or relinquish (comfort, hope, etc). 4. to yield or resign (an office, privilege, etc) in favour of another. 5. Obsolete to return: to surrender thanks. -verb (i) 6. to give oneself up, as into the power of another or of an emotion, course of action, etc; submit or yield. -noun 7. the Act of surrendering. 8. Insurance the abandonment of a policy by the party insured, for a consideration, the amount receivable (surrender value ) depending on the number of years elapsed from the commencement of the risk. 9. the deed by which a legal surrendering is made. ...
- (b) The Oxford Australian Dictionary defines
Surrender ... 1. hand over, relinquish possession of, especially on compulsion or demand; give into another's power or control. 2. a accept an enemy's demand for submission. b give oneself up; cease from resistance; submit. 3. ... give oneself over to a habit, emotion, influence, etc. 4. give up rights under (a life-insurance policy) in return for a smaller sum received immediately. 5. give up (a lease) before its expiry. 6. abandon (hope etc). • the act or an instance of surrendering. [square] surrender to bail duly appear in a law court after release on bail. Surrender value the amount payable to one who surrenders a life-insurance policy. ...
47. Having regard to the dictionary definitions set out in the preceding paragraph, we consider that the applicant is entitled to contend that there was a supply by CSR within s 9-5(2)(d) of the GST Act.
48. For the purposes of this second section, we find that there was a supply within s 9-5(2)(g) or s 9-5(2)(d), that that supply was made for consideration and so that the applicant is entitled to the input tax credit which it seeks.
49. Having found for the applicant in respect of the second section, it is not strictly necessary for us to deal with either the first section or the third section. We do so for two reasons:
- (a) It is possible that it will be found that our finding in relation to the second section is erroneous; and
- (b) This is a test case and it behoves us to deal with all three sections although, in respect of the first and third sections, not in the same detail.
Part G - The third section
50. The applicant contends that the Deed of Release of itself constituted a supply; when the quarry vested in the applicant, the rights of CSR were then transformed into a statutory right to obtain compensation.
51. By the Deed of Release, "in consideration of the payment of the Compensation" defined as $25,099,500, CSR:
HEREBY releases the Council and its successors and assigns from any claim for compensation, causes of action, damages, costs, expenses and interest ... which the Releaser [CSR] may have against the Council.
52. The applicant thus contends that when CSR surrendered its rights in consideration of the payment of $25,099,500, there was a supply for consideration within ss 9-10(2)(e), (g) and (h) of the GST Act.
53. The respondent contends that if the applicant's submissions were accepted, it would follow that every time a business pays an invoice there is a "supply", not of the goods or services acquired, but because there has been a release of the supplier's right to payment of the debt.
54. In our view, the third section can be dealt with in summary fashion. The compensation was paid to CSR in consideration of the quarry and for nothing else. Alternatively, if there was anything else, or any other right that was available to CSR (and we do not think that there was any such additional right), that additional right would give rise to a question of apportionment. It would therefore be necessary to apportion the compensation paid between compensation for the quarry proper and compensation for that other right (whatever it might be). There was no suggestion or evidence as to a possible apportionment and we do not think that any such apportionment was either necessary or possible.
55. It is of some relevance to note that in addition to the Land and Environment Court litigation referred to previously in these reasons, CSR brought an action against the applicant in the Supreme Court: see
CSR Ltd v Hornsby Shire Council  NSWSC 946. In paying compensation, the applicant (in that action) withheld $2,300,000 by way of GST pending the receipt of a tax invoice. Gzell J noted that CSR (in that action) was entitled to payment of the additional amount of $2,300,000. He also refused to issue a ruling as to the delivery of a tax invoice. The case is thus of limited relevance so far as this particular application before the tribunal is concerned. CSR Ltd is of some interest as to the process by which compensation was calculated: see paras 4 to 7 as follows:
- 4. For the purposes of the Land Acquisition (Just Terms Compensation) Act 1991(NSW), the Council was an authority of the State in terms of s 4(1). In terms of s 4(2)(a) it was authorised to acquire land by compulsory process since it was so authorised under the Local Government Act 1993, s 186(1). Section 19(1) provided that an authority of the State authorised to acquire land by compulsory process might, with the approval of the Governor, declare, by notice published in the Gazette, that any land described in the notice was acquired by compulsory process. That procedure was followed with respect to CSR's land.
- 5. The effect of publication of the notice was provided by the Land Acquisition (Just Terms Compensation) Act 1991, s 20(1): on the date of publication the land described in the notice was, by force of the Act, vested in the authority of the State acquiring the land and freed and discharged from all estates, interests, trusts, restrictions, dedications, reservations, easements, rights, charges, rates and contracts in, over or in connection with the land.
- 6. The Land Acquisition (Just Terms Compensation) Act 1991, s 37 provided that an owner of an interest in land that was divested by an acquisition notice was entitled to be paid compensation in accordance with the Act by the authority of the State that acquired the land. Section 39 required the claimant for compensation to lodge a claim in prescribed form. CSR did so. A copy of the claim was given to the Valuer-General in terms of s 41.
- 7. The Land Acquisition (Just Terms Compensation) Act 1991, s 47 required the Valuer-General to determine the amount of compensation to be offered. Section 42(1) required the authority of the State within 30 days after publication of the acquisition notice to give the former owners of the land written notice of the compulsory acquisition, their entitlement to compensation and the amount of compensation offered as determined by the Valuer-General. The Minister responsible for the authority of the State was entitled to extend the period of 30 days under s 42(4). He did so in this case. The Council did not comply with the extended time and, pursuant to s 42(8), the Valuer-General gave CSR written notice of the amount of compensation to be offered. The notice contained the following:
DETERMINATION OF COMPENSATION: Twenty Five Million Ninety Nine Thousand Five Hundred Dollars ($25, 099,500).
The above determination comprises:
Market ValueSection 55(a) $25,000,000
Special Value Section 55(b) N/A
Severance Section 55(c) N/A
Disturbance Section 55(d) $99,500
Solatium Section 55(e) N/A
Increase in the value of other land Section 55(f) N/A
Decrease in the value of other land Section 55(f) N/A
Any liability for the GST is a factor in the market for property and is therefore embedded in the lands Market Value as defined in Sec 56 of the Land Acquisition (Just Terms Compensation) Act 1991, and also in allowances for certain other costs, consequently this determination is GST inclusive.
Part H - The first section
56. The first section concentrates on section 9-10 (1) of the GST Act and poses the question of whether that subsection requires that there is a requirement for some form of positive action on the part of the landowner in order for a resumption to constitute a supply under section 9-10 (1). The example referred to earlier assumes a passive landowner whose land is resumed for road-widening purposes against his wishes and even against his opposition, the question is as to whether that resumption will constitute a supply.
57. Case law from other countries suggests that the concept of a supply does indeed require some form of positive action on the part of the supplier.
Databank Systems Limited v Commissioner of Inland Revenue  2 NZLR 312 (a judgment of the New Zealand courts),
Kirkness (Inspector of Taxes) v John Hudson & Co Ltd  AC 696 (a judgment of the United Kingdom courts) and
Shell's Annandale Farm (Pty) Ltd v Commissioner for South African Revenue Service 62 SATC 97 (a judgment of the Republic of South Africa) all suggest that in the absence of some act by the person whose property is being acquired, there will not be a relevant supply. It must be noted, though, that in all three cases, the relevant legislation differed from the legislation in Australia. In particular, there was not in any of the three cases a legislative provision similar to or analogous with s 9-10(2)(g) of the GST Act. (Following the judgment in Shell's Annandale, the South African authorities amended their legislation so as to ensure that an involuntary resumption or expropriation constituted a supply for their VAT purposes.)
59. In the Republic of South Africa (and by way of one example in respect of cases decided in other countries) at the time when Shell's Annandale was decided, the term "supply" was defined to mean "all form of supply irrespective of where the supplies are effected and any derivation of supply shall be construed accordingly". That wording is not materially dissimilar from the wording of section 9-10(1) of the GST Act. In Shell's Annandale, Davis J held (at p106):
In short whilst it is possible to construe 'supply' to include a passive connotation, the Act needs to be read as a whole in order to extract the meaning from the text and its purpose. Thus the word 'services' as employed in s 7(1) of the Act is defined to include anything done or to be done including the granting, assignment, cession or surrender of any right or the making available of any facility or advantage. There are indications in the Act which would appear to employ the active as opposed to the passive meaning of the word 'supply' as set out in the dictionary.
The emphasis on the active finds support in the definition of enterprise. As s 7(1)(a) of the Act makes clear there are two requirements before VAT can be levied, namely there must be a supply and such supply must be in the course of furtherance of any enterprise carried on by a vendor. But for this reason the definition of enterprise represents a key definition in the Act. The relevant part of the definition of enterprise reads as follows:
In the case of any vendor other than a local authority, any enterprise or activity which is carried on continuously or regularly by any person in the Republic or partly in the Republic and in the course of furtherance of which goods or services are supplied to any other person for a consideration, whether or not for profit, including any enterprise or activity carried on in the form of a commercial, financial, industrial, mining, farming, fishing or professional concern ...
The words emphasised in the definition highlight the importance of some act on the part of the vendor prior to VAT being charged. ...
60. This case is, as the respondent contends, analogous to the circumstances in Kirkness (supra) where the House of Lords considered whether the compulsory acquisition of railway wagons by virtue of the Transport Act 1947 amounted to a "sale". Their Lordships held that it did not, because the concept of sale requires mutual consent unless the statutory context requires a wider meaning.
61. GSTR 2006/9 was referred to during the course of the hearing. In particular, the tribunal was referred to clauses 71 and 72 of that Ruling:
- 71. In overseas jurisdictions the term 'supply' has been held to take its ordinary and natural meaning, being 'to furnish or to serve' or 'to furnish or provide'. The Commissioner picks up this meaning in considering the meaning of supply in the GST Act at paragraph 41 of GSTR 2004/9, a ruling which is about the assumption of liabilities:
In adopting the ordinary and natural meaning of the term, 'to furnish or provide', it follows that an entity must take some action to 'make a supply'. This approach is consistent with the use of active phrases throughout the examples of supplies in subsection 9-10(2), such as the normalised verbs: 'a provision'; 'a grant'; 'a creation'; 'a transfer'; 'an entry into'; and 'an assignment'.
- 72. The use of the word 'make' in the context of section 9-5 was considered by Underwood J in
Shaw v. Director of Housing and State of Tasmania (No. 2) ('Shaw') in relation to the payment of a judgment debt. His Honour was of the view that GST only applies where the 'supplier' makes a voluntary supply and not where a supply occurs without any action by the entity that would be the 'supplier' had there been a supply. He considered the actions of the judgment creditor with respect to the extinguishment of the debt when the judgment debtor made the payment of the judgment sum to meet the judgment debtor's obligations.
62. It was contended that
IRG Technical Services Pty Ltd & Anor v Federal Commissioner of Taxation 2007 ATC 5326; (2007) 165 FCR 57 is authority for the proposition that a ruling in not binding on the tribunal. It is also clear that in the absence of reliance, a ruling, although expressed to be public binding ruling, is not in respect of an indirect tax such as GST binding on the respondent. The Ruling in its terms is not binding on the tribunal.
63. The applicant contended that it is relevant for this purpose to draw on cases decided in respect of the Income Tax Assessment Act 1936 (the Tax Act), so that if there could be taxation in respect of an involuntary sale or disposal, that reasoning would apply equally in the context of the GST Act. The arguments of the applicant are neatly encapsulated in paras 95 to 103 of AS:
- 95. Within the income tax context, section 26(a) of the Income Tax Assessment Act 1936 ('ITAA 1936') included as assessable income any 'profit arising from the sale by the taxpayer of any property acquired by him for the purpose of profit making by sale'. Section 26AAA(2) of the ITAA 1936, provided that where 'the taxpayer has ... sold the property ... before the expiration of 12 months from the date on which he purchased the property', then his assessable income 'includes any profit arising from the sale'. Section 59(1) of the ITAA 1936, provided that where any property in respect of which depreciation was allowed 'is disposed of, lost or destroyed' then the depreciated value less consideration received (e.g. insurance proceeds) is assessable income.
- 96. Each of those provisions has been considered in the context of a compulsory acquisition. In
Smith v FCT (1932) 48 CLR 178 at issue was whether a dividend was paid wholly and exclusively out of profits 'arising from the sale of assets which were not acquired for resale at a profit'. Land was there resumed by compulsory process. By majority, the High Court held the resumption was a sale. Rich J stated at 186 that:
Sale is not a word of precise technical import . In many contexts the essential idea it conveys is an agreement to transfer property for a valuable consideration. Often the valuable consideration intended is restricted to money. In other contexts agreement is not of the essence of the conception but the conversion of property into money or its realization is the notion sought to be expressed (emphasis added).
- 97. In the joint judgment of Starke, Dixon and McTiernan JJ it is stated at 189-190 as follows:
Under the City of Brisbane Improvement Act, however, the Council is authorized to declare that any land required for the purposes of the Act has been taken by the Council, and, upon publication of a notice of resumption, the land becomes vested in the Council and the right of the person from whom the land is taken is converted into a claim for compensation under the Act . It is an exchange of land, made under legislative enactment, for money. Substantially the Act has provided the price at which the land is to be taken or resumed ... Does the expression 'sale of assets' require a definite contract of purchase and sale, or does it mean a parting with assets in the same manner as upon a contract of purchase or sale ? The latter view, in our opinion, is the right one ... The Act looks to the substance of the matter, and is not concerning itself with technical definitions of the word sale . It would be strange indeed if the Income Tax Assessment Act 1922-1927, sec. 16 (b), applied to compulsory acquisitions of lands by means of a notice to treat under such Acts as the Land Compensation Act of Victoria and not to compulsory acquisitions by means of a notice of resumption under such Acts as the City of Brisbane Improvement Act (emphasis added and citations omitted).
- 98. Subsequent cases have followed the general approach to the construction of the words 'sale', 'sold' and 'disposed of' adopted in Smith's case. In
Hobart Bridge Co Ltd v FCT 82 CLR 372 at page 382, Kitto J considered the compulsory acquisition of shares by the State Government of a bridge undertaking. His honour held the profit was capital, since the property was not acquired with the requisite purpose and stated as follows:
The profit arose to the appellant company from a compulsory acquisition of shares. Nothing turns, I think, upon any distinction between a conversion of shares into cash by means of compulsory acquisition and a similar conversion by means of an ordinary sale: cf.
Smith v. Federal Commissioner of Taxation.
- 99. In
Coburg Investment Company Pty Ltd v FCT (1960) 104 CLR 650 at page 663, land was acquired under the Lands Compensation Act 1928 (Vict.) by the procedure of notice to treat and negotiation as to compensation. That procedure differed from that under the Queensland statute considered in Smith's case. His honour, Windeyer J stated:
Section 26 reflects and should be read in the reflected light of a general principle: that is, that if property be acquired for the purpose of profit-making by dealing in it by sale ... then a surplus received when it is realised is, in an economic sense, received on income account not on capital account. It matters not, for the application of the general principle, whether the actual realisation occurred when it did and as it did as a result of compulsion or pressure or purely voluntarily : this is emphatically so when the actual amount obtained on realisation is arrived at by mutual assent after negotiation' (emphasis added).
- 100. Each of Smith, Hobart Bridge and Coburg Investments concern whether a compulsory acquisition is a 'sale' in the context of assets acquired for the purpose of profit making by sale. Each decision has held, that a compulsory acquisition is a 'sale', irrespective of whether the process is in the form of a notice to treat as opposed to a statutory vesting of title coupled with a right to compensation. The presence within section 26(a) of the required 'purpose' of profit making has enabled the Court to conclude no distinction should be drawn between a 'sale' and a compulsory acquisition.
- 101. Section 26AAA as enacted, differs from section 26(a) in that there is no requirement for any 'purpose' to be established. The criterion of liability was simply purchase and sale within 12 months.
- 102. As such, it could be argued the word 'sale' in section 26AAA, unlike section 26(a), required consensual agreement. Such a construction of sale in section 26AAA was rejected in
Brettingham-Moore v FCT 81 ATC 4658 at page 4659. That was a case of compulsory acquisition of land, by the notice to treat procedure, within 12 months of acquisition. Neasey J noted that section 26AAA sat alongside section 26(a) and that the fixed time scale avoided much of the difficulty and time consuming inquiry as to 'purpose' inherent in section 26(a). His honour continued:
The two authorities above-mentioned,
Smith v. F.C. of T., and
Coburg Investment Co. Pty. Ltd. v. F.C. of T., make it plain in my view that a compulsory acquisition of property pursuant to statutory powers is ordinarily in its essential nature a 'sale', even though as far as the owner is concerned the sale is not voluntary but is forced upon him (emphasis added).
- 103. The other case concerning section 26AAA was the decision of French J, as his honour then was, in
FCT v Salanger (1988) 19 FCR 378 at page 387. The context differs slightly. There the compulsory acquisition was not by a public authority. Rather it concerned the mopping up of a minority shareholding in a 100% company takeover. Unfortunately for the taxpaying shareholder, the takeover occurred within 12 months. French J noted that, unimpeded by authority, there was much substance to the view that a compulsory acquisition was not a 'sale'. But in his honour's conclusion:
I am of the view that the law is sufficiently settled by the course of decision-making in analogous cases to require me to hold that the word 'sold' in s 26AAA extends to the acquisition of Mrs Salenger's shares.
64. While it is true that the term "supply" is if anything wider than the term "sale", it would in our view be inappropriate to construe the GST Act by reference to the Tax Act. Each of the two statutes must be construed in accordance with its own language and in accordance with the context in which that language appears.
65. The respondent contends, in our view correctly, that the contexts of ss 26(a), 26AAA and 59 of the Tax Act are distinguishable from the GST concept of supply. As the respondent points out, the fundamental concept underlying the Tax Act in this regard is the distinction between capital and income.
66. The applicant contends that the use of the second-person "you" language in the GST Act is no more than a drafting device and does not materially affect the question of whether a purely passive supply is a supply for GST purposes: see generally
HP Mercantile Pty Ltd v Federal Commissioner of Taxation 2005 ATC 4571; (2005) 143 FCR 553.
67. The respondent contends that the word "make" in the expression "you make the supply" suggests that positive action is required. Against that, the applicant points to the fact that the Explanatory Memorandum (EM) stresses that the term "taxable supply" is to have the widest reach possible. The EM commences at [3.4] by noting "If you make a taxable supply you must pay GST on the taxable supply". Paragraph [3.5] of the EM says "You make a taxable supply if: you make a supply for consideration". Paragraph [3.6] states as follows:
- 3.6 A supply is any form of supply whatsoever -- subsection 9-10(1). This is defined broadly and is intended to encompass supplies as widely as possible . Subsection 9-10(2) of the Bill provides a list of things that are included as supplies. It is not an exhaustive list. It does not limit the possible breadth of the definition of supply in subsection 9-10(1) (underlining added).
68. Reference was made in this particular context to what were referred to during the hearing as the UK gun cases. They were referred to in some detail in paras 119 to 126 of AS as follows:
- 119. The Council contends that its position is consistent with the decision and observations of the Court of Appeal in
G Stewart & T Hammond t/a GT Shooting v Commissioners of Customs & Excise affirming the earlier case of
Parker Hale Ltd v Commissioners of Customs & Excise  STC 388. Both cases concerned the VAT consequences of the gun surrender and compensation regime enacted in the UK following the Dunblane shootings. By the Firearms (Amendment) Act 1997 (UK) it became an offence to possess, purchase, acquire, manufacture, sell or transfer hand guns. Parker Hale and GT Shooting were dealers and were the owners of guns that it would become illegal for them to possess. Section 15 of the UK 1997 Act empowered the Secretary of State to make such arrangements as he thought fit to secure the orderly surrender of guns. Section 16 provided that the Secretary of State should, in accordance with any Scheme made by him 'make payments in respect of firearms and ammunition surrendered at designated police stations in accordance with the arrangements made by him under section 15'.
- 120. In form, the legislative scheme was that, possession of hand guns was now illegal, but would compensate the owner if such guns were surrendered in the prescribed manner. In substance, such guns were compulsorily acquired by the State. At paragraph  the Court of Appeal described the effect of the arrangements as follows:
It seems to me plain from the shape of the scheme that the relinquishment there referred to has the effect that the title to the goods is transferred away from the original owner to the Secretary of State.
- 121. Section 4(1) being the relevant provision of the Value Added Tax Act 1994 (UK) (the 'VAT Act') provided:
VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.
- 122. By section 5(2) of the VAT Act 'a supply ... includes all forms of supply, but not anything done otherwise for a consideration'. Structurally, the VAT provisions are very similar to section 9-5 and 9-10 of the GST Act. The VAT Act uses the expression 'a taxable supply made by a taxable person' as opposed to the GST Act formulation of 'you make a taxable supply if you make the supply for consideration'.
- 123. The Court of Appeal at  adopted and approved of what was said by Moses J in Parker Hale as follows:
... the fact that the government acquired the guns for destruction is irrelevant. The significant feature of the transaction was that Parker Hale Limited transferred title to the guns to the government . Thus, the supply of guns gave rise to consumption by the government. Consumption does not depend upon questions of whether there is any further use for the guns, or if they were destroyed, but upon the acquisition of title to the goods (emphasis added).
- 124. The Court of Appeal held there was relevantly a supply for consideration, in that:
... once the scheme was promulgated and acted on, its beneficiaries could clearly insist on its fulfilment by the government, through the courts if necessary. In my judgment, there was here the necessary mutuality or direct link, and plainly a legal relationship between supplier and recipient so that the payment of compensation constituted consideration for the supply of the handguns.
- 125. Both Moses J in Parker Hale and the Court of Appeal quoted with apparent approval, the opinion of the Advocate General in
Landboden-Agrardienste GmbH & Co KG v Finanzamt Calau  STC 171 at  as follows:
- 23. Thus, if a public authority acquires land with a view to the construction of a motorway but in the event does nothing with it, there is still a supply of goods. Moreover, the fact that the purchase is made in the public interest of a sound transport policy does not remove it from the scope of VAT ....
- 126. The Council contends that the decisions in Parker Hale and GT Shooting, although on analogous provisions, support its contention that, it is the acquisition of title for consideration, which is the criterion of liability to tax. The payment of compensation is directly linked to the acquisition and is plainly 'consideration for the supply'.
69. The respondent in turn argued that the UK gun cases are distinguishable on their facts. In both
G Stewart & T Hammond t/a GT Shooting v Commissioners of Customs & Excise  EWCA Civ 1988 and
Parker Hale Ltd v Customs & Excise Commissioners  STC 388 the "supplier" physically surrendered the guns at a designated police station. That act, together with the prohibition on their continued possession of the weapons resulted in the gun owners transferring title to the Crown.
70. It would seem, having regard to the judgment of the Full Court in Westley (supra) that the question is by no means free of doubt. However, that judgment does indicate (albeit obiter) that the Full Court inclines to the view that some positive action is required. An obiter pronouncement of the Federal Court must be persuasive in relation to a decision by the tribunal; we would therefore find (were it necessary for us to do so) for the respondent in respect of the first section. Such a finding appears to gain a measure of support from the earlier decision of Underwood J in
Shaw v Director of Housing and State of Tasmania (No. 2) (2001) 10 Tas R 1; 159 FLR 322, referred to in clause 72 of GSTR 2006/9.
Part I - Conclusion
71. We find in summary that when CSR gave notice in terms of the LEP it did indeed incur legal obligations, and moreover did so in respect of subsequent actions leading up to the acquisition of the quarry by the applicant. That being so, there was a supply within s 9-10(2)(g) of the GST Act. There was, moreover, a surrender within s 9-10(2)(d). That being so the applicant succeeds in respect of the second section. We would find, were it necessary for us to do so, that the applicant does not succeed under either of the first or the third sections.
72. In the circumstances, the applicant is entitled to the input tax credit that it seeks and the objection decision under review must be set aside.