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ADMINISTRATIVE APPEALS TRIBUNAL - GENERAL ADMINISTRATIVE DIVISION

Case [2000] AATA 175

B J McMahon, Deputy President

14-16 February, 7 March 2000 - Sydney

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B J McMahon, Deputy President.    This is an application to review 2 decisions rejecting claims for diesel fuel rebate. The applicants purchased diesel fuel for use by them in what are claimed to be mining operations and accordingly, claim the rebate provided by s 164 of the Customs Act 1901 (Cth) and the corresponding s 78 of the Excise Act 1901 (Cth). Freight Rail Corporation of New South Wales is owned by the State Government and operates a rail service between various coal mines, primarily in the Hunter Valley Region, to the coal handling facilities at the port of Newcastle, owned and operated by Port Waratah Coal Services Limited (PWCS). Prior to 1 July 1996, the same rail service was operated by the State Rail Authority of New South Wales. In these proceedings, nothing turns on the different identities of the claimants.

  2  The State Rail Authority Claim is for a total of 56,871,237 litres purchased during the period 17 December 1994 to 30 June 1996. The rebate claimed is $18,374,527.96. Freight Rail Corporation made a claim for a total of 61,711,784 litres purchased between 1 July 1996 and 15 November 1997. The amount claimed is $19,938,460.29. The overall claim period, therefore, is 17 December 1994 to 15 November 1997.

  3  It is alleged that certain procedures carried out at Newcastle by PWCS continued the mining operations commenced at the various coal mines. The claims for rebate are based on that submission. The evidence presented was in general terms. If it should be ultimately established that either or both of the applicants is or are entitled to the rebate, then the claims will need to be re-examined in detail. For example, the evidence disclosed that some of the coal transported from the mines was loaded directly on to vessels at the port of Newcastle without any procedures being carried out by PWCS in relation to that coal. Secondly, there was a change in the legislation during the claim period to which reference will later be made. The claims falling within the period after the commencement of the amending legislation will need to be re-examined in the light of those changes. Thirdly, carriage of coal that already exceeded the quality required in the contract specifications (to which reference will be made) being coal that was mixed with inferior coal would not be eligible for any rebate because that coal was not beneficiated in any way. There may be other matters which will need to be looked at in detail if the claims are to be re-visited. For present purposes, I have accepted the evidence tendered by the applicants on a general basis and will deal with the case as the applicants sought to present it.

  4  During the claim period, there were in existence 3 definitions of "mining operations" in s 164. However, because of the retrospective provisions introduced by s 2(2) of the Customs and Excise Legislation Amendment Act 1995 (Cth), there were only 2 legal versions of the definition operative throughout the claim period. From 17 December 1994 until 1 August 1997 (the major part of the claim period) the applicable definition of "mining operations" was relevantly:

   

"mining operations" means:

 (a)  exploration, prospecting, or mining for minerals, or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or

 (b)  the dressing or beneficiation of minerals, or ores bearing minerals, as an integral part of operations for their recovery;

 

and includes:

 (c)  if minerals, or ores bearing minerals, are dressed or beneficiated at a place other than the mining site as an integral part of operations for their recovery:

 (i)  the transporting of the minerals or ores from the mining site to that place; and

 (ii)  the return journey from that place to the mining site of the vehicles or equipment used in transporting the minerals or ores, if that journey is for the purpose of later carrying out the mining operation referred to in subparagraph (i) or for the backloading of raw materials or consumables for use in a mining operation referred to in paragraph (a) or (b); or …

  5  With effect from 1 August 1997 (shortly before the end of the claim period) the definition was amended by the Customs and Excise Legislation Amendment Act (No 1) 1997 (Cth) so as to provide relevantly:

   

mining operations means:

 (a)  exploration or prospecting for minerals, or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or

 (b)  operations for the recovery of minerals, being:

 (i)  mining for those minerals including the recovery of salts by evaporation; or

 (ii)  the beneficiation of those minerals, or of ores bearing those minerals;

 

Note: The meaning of paragraph (b) is affected by subsections (7A), (7B) and (7C).

 

and includes:

 (c)  if minerals, or ores bearing minerals, are beneficiated at a place other than the mining site as an integral part of operations for their recovery:

 (i)  the journey undertaken for the purpose of transporting the minerals or ores from the mining site to that place except to the extent (if any) that the journey involves transportation by sea; and

 (ii)  the return journey of a vehicle, a locomotive or other equipment from that place to the mining site or any part of that journey if it is undertaken for the purpose of repeating a journey referred to in subparagraph (i) or for the backloading of raw materials or consumables for use in a mining operation referred to in paragraph (a) or (b); or …

As indicated by the note to para (b) of the definition, there were also added 3 subsections which affect the meaning of "operations for the recovery of minerals". Only 2 of those subsections, (7A) and (7C), are relevant to the present proceedings. They provide:

   

(7A) For the purposes of the definition of mining operations, operations for the recovery of a mineral cease:

 (a)  when the process of beneficiation ceases; or

 (b)  in the absence of a beneficiation process - when the mineral, or ores bearing the mineral:

 (i)  are first stockpiled or otherwise stored at the place at which the mining operation is carried on; or

 (ii)  if subparagraph (i) does not apply - are removed from the ore body or deposit.

 

(7C) In determining whether a particular process to which a mineral, or ores bearing a mineral, are subjected constitutes beneficiation of that mineral or those ores, regard is to be had to the nature of the technical process involved but no regard is to be had to any market considerations that might affect the decision to subject that mineral or those ores to that process.

  6  There was agreement between the parties that coal is a mineral for the purpose of the definition. The applicants then submitted that certain blending operations conducted at PWCS, along with the removal of contaminants such as scrap metal and concrete, qualify as "beneficiation" and are integral to the recovery of coal within the meaning of the definition.

  7  The applicants further submitted that coal for export markets is "recovered" only after the blending process at PWCS has been completed and upon loading into the vessels for export. Thus the beneficiation becomes an integral part of the operations for the recovery of coal intended to be used for particular purposes. By virtue of the provisions of para (c), fuel purchased for transport in the course of these operations, is fuel purchased for use in mining operations.

  8  The second definition introduced specific factors addressed to the very submissions which the applicants raised. I will deal with the effect of the section later in these reasons.

  9  The respondent contended that the evidence did not support the applicants' submissions. In particular, the respondent contended that the meaning of beneficiation (both in its ordinary English language sense and in the sense described by an expert) is the process of separating and removing undesirable mineral matter from valuable coal components. This is not the procedure carried out by PWCS at the port of Newcastle. The respondent agreed that the process undertaken in the coal preparation plants, which use various means of separating coal from waste material and then remove excess moisture from the recovered coal, amounted to beneficiation. It was, however, submitted that this process was completed at the end of the de-watering process which also constituted the end of any operations for the recovery of coal.

  10  It was essential to the applicants' submissions that economic considerations be taken into account in determining whether recovery had taken place. For this reason, evidence was given as to market practices.

  11  In New South Wales, the major coal producing regions are in the Hunter, Newcastle and Gunnedah coalfields. The coal is Permian in age and is of a quality suitable for the export market and for domestic consumption. Coals consist of a large variety of coal types ranging from low-ash soft-coking coal used predominantly in the production of iron and steel to high-ash thermal coals, used predominantly in power stations. Coking or metallurgical coal is used predominantly for its carbon content in iron and steel production. Coking coal can only be prepared from coal with specific characteristics. Thermal or steaming coals on the other hand are primarily used for their heating value in power generation, steam raising, industrial boilers or cement manufacturing.

  12  The export market is the dominant market for coal producers in New South Wales because the export demands for both steaming and coking coal have increased significantly over the last decade. On the other hand, demand within the domestic market has remained relatively static. The evidence was that very little coking coal for domestic consumption was produced in the New South Wales coalfields during the claim period. Most domestic coking coal was sourced from Queensland and the New South Wales southern coalfields.

  13  Coal purchasers in the export market require adherence to strict coal specifications. These are usually spelt out in the formal contracts between the exporting miner and the overseas purchaser. Two of them were tendered in evidence. Purchasers require specific properties relating to inherent moisture, total moisture, ash, sulfur content, crucible swelling number, volatile matter, sizing, fluidity, calorific value, fixed carbon, hardgrove grindability index, nitrogen and ash fusibility temperature. Of these, the ash content was mentioned in evidence more often than any of the other desirable properties.

  14  Dr Yeates gave evidence that coal purchasers in the export market exert constant pressure on coal producers to improve the quality of their product in this market. In particular, coal purchasers are continually seeking reduced ash levels to increase the energy of thermal coals, to improve the coking qualities in coking coals and to increase the cost competitiveness within the export market.

  15  The importance of an appropriate ash percentage was described by Mr Edwards. This part of his evidence also illustrates the natural occurrence of undesired mineral matter after the basic mining process has commenced. This undesired material, as he points out, is removed by a washing process to which reference will later be made.

   

Coal that has been mined and broken and/or crushed, but not cleaned, is referred to as "raw" or "run or mine" (ROM) coal. Raw coals have experienced a range of different geological circumstances, and are described as having different "ranks" ranging from brown coals to black coals to anthracites. The rank alone places limits on its use. Although all coal can normally be burnt to produce energy only the higher rank black coals may have suitable properties to produce metallurgical coke. Raw coal contains significant amounts of inorganic mineral matter, which may derive from: material adjacent to the coal seam that was mined with it; bands within the coal seam; and finely disseminated material within the coal itself. Such inorganic mineral matter is commonly known as "ash", referring to the residue left after burning the coal. Ash:

 (a)  reduces the specific energy (calorific value) of thermal coal, and increases pollution and ash disposal costs associated with burning coal;

 (b)  adversely affects coking properties of metallurgical coal; and

 (c)  being useless weight, increases the transportation cost of coal. Ocean transport costs alone amount to about a quarter (usually 20-35%) of the cost of coal delivered to Asian customers.

 

Some Australian coal is used as raw coal, predominantly in domestic power stations. Some raw coal is exported, but almost all coal exported from Australia has been cleaned (or washed) at a coal preparation plant, which is often referred to as coal "washery".

  16  It was an important part of the applicants' submission that the exporter's objectives must be taken into account in determining whether "recovery" has been completed. Although these objectives might be said to be obvious, there was evidence that they included an intention to maximise profit margin, to minimise mine cost by maximising coal yield and matching quality of supply with market requirements on a short, medium and long-term basis. Dr Yeates explained his use of that last phrase to mean matching coal production with export sales contract specification requirements for the shipping schedule for the next month (the short term), the shipping schedule for the next 2 to 4 months (the medium term), and the annual mining plan for the mine and, if applicable, the operating company (the long term).

  17  Movement of the coal begins with its extraction. This was described by Dr Yeates as follows:

   

In an open cut mine, the overburden covering the coal seam is removed by various means including draglines, front-end loaders, excavators and trucks. Once the coal seam is exposed, it is usually mined by either shovel, excavator or front-end loader. The raw coal is then hauled by truck to dumping points near the coal preparation plant.

 

In the underground mines, coal is usually extracted using the longwall method or with continuous miners using board and pillar techniques.

 

The raw coal is stockpiled ready for treatment by a coal preparation plant. The coal preparation plant is designed to wash the coal for the purpose of removing as much of the inorganic mineral matter as is physically and economically viable. Generally, the inorganic material is derived from three sources:

 (a)  the overburden or floor material, recovered with the coal as part of the mining process. This material may range from stone or clay to carbonaceous shale or low quality coal;

 (b)  bands of inorganic matter, such as sediments or intrusions ranging from a millimetre thickness to substantial bands within the seam; or

 (c)  finely disseminated inorganic mineral matter within the coal itself, derived from fine sediments washed into the vegetation during the coal formation process or contained within the vegetation during deposition.

 

Coal preparation plants generally use gravity techniques to wash the raw coal, based on the difference of specific gravity between coal and inorganic material. Annexure "RY7" provides a brief description of the washing process of the Bulga coal preparation plant.

  18  The washing process referred to in the last paragraph is one agreed upon by all parties as representing a process of beneficiation. To the applicant, that process did not finish at the coal preparation plant. It is nevertheless instructive to follow the technical procedures in that plant so as to understand an agreed example of what is constituted by beneficiation:

   

3. Coarse Coal Cleaning

 

3.1 Coarse coal is cleaned by utilising the difference in specific gravity between coal and waste materials such as shale or mineral impurities intermixed with the ROM coal. The specific gravity of mineral free coal varies, but generally ranges from1.2 to 1.7. The specific gravity of shale and clay minerals, often associated with coal, generally lies between 2.6 and 3.0.

 

3.2. Magnetite, when mixed with water, forms a high-density suspension which, depending on the quality of magnetite, has a specific gravity range between 1.3-2.0. By placing the coal in a water/magnetite suspension, with a specific gravity between the coal and the waste minerals, coals with different ash content can be separated by gravity.

 

3.3. The coarse coal is continuously fed into a dense medium separation bath called a "Daniels' bath" which contains a circulating water/magnetite suspension. The clean coal floats to the surface and flows, with the magnetite suspension, over the edge of the bath onto a screen, while the waste material (with a higher density) sinks and is removed by a conveyor within the bath.

 

3.4. The clean coal is then sprayed (rinsed) with water while being passed over a vibrating screen to remove the magnetite for re-use. The refuse material is also rinsed to remove the magnetite, then transported to a refuse hopper, where it is collected and dumped.

 

3.5. The clean coal is crushed to approximately 50mm in size before being discharged to one of the clean coal stockpiles.

 

4. Large and Small Coal Cleaning

 

4.1. The large and small coals are cleaned by separate heavy medium cyclones. The cyclone is a cylindrical and/or conical vessel which separates coal particles by means of centrifugal forces and density of the medium. This process is again dependent on the difference in specific gravity of coal and waste.

 

4.2. A water/magnetite/large coal slurry is pumped tangentially into the cyclone. The spiralling vortex created within the cyclone separates the particles based on their different specific gravities. Particles with higher specifics gravites move out from the axis of the vortex and settle downwards. The lower specific gravity material, which is the coal, travels upwards and is collected and rinsed separately.

 

4.3. The refuse is discharged through the spigot at the bottom of the cyclone, rinsed and transported to a hopper where it is collected and dumped. The clean coal is rinsed, dewatered then transported to a clean coal stockpile.

 

Fine Coal Cleaning

 

4.4. The material recovered from the de-sliming process contains appreciable amounts of fine coal. This coal is recovered by cyclones and spirals.

 

4.5. The fine coal is separated with refuse material as heavy product in water washing cyclones. The light material from the cyclone is discharged as waste. The fine coal is then separated from the refuse by gravity and centrifugal forces in a bank of spirals.

 

4.6. The final coal mixture is then thickened by passing the feed through a water washing cyclone before being fed to a fine coal centrifuge.

 

Dewatering

 

4.7. Once the raw coal has been cleaned, it is dewatered to remove excess water accumulated in the cleaning process by a centrifuge.

 

4.8. In a centrifuge wet coal is thrown against a screen by centrifugal forces set up by the rapid rotation of a centrifuge. The water passes through the screen while the coal is held back. Large, small and fine coal centrifuges are used to clean the different sizes of coal.

  19  After the washing process, coal is then stacked at the mine in accordance with the various grades which the process has identified. Some of these stockpiles will themselves satisfy the specifications of the purchaser. They may, for example, contain only coal with a 14% ash content which is exactly what has been ordered by the purchaser. In that case, that particular coal will be freighted directly to the coal-handling facility of PWCS and will be loaded on the vessel without further treatment (except possibly the magnetic treatment which will later be referred to). Where the stockpiles do not meet the exact specification, they will need to be blended to produce the desired end result. Thus, if the purchaser has specified an ash content of 9.5%, it would be possible to satisfy that order with an ash content of 8% (higher quality coal) but this would be uneconomic for the exporter. The solution adopted is to blend the 8% coal with 14% coal (for example) until a mathematical average of 9.5% is reached. Dr Yeates gave evidence that in theory it would be possible for coal producers each to establish at their mine site facilities to enable them to carry out the blending of coals from different stockpiles so as to produce at the mine site the coal required to satisfy an export contract. His evidence continued, however, that the costs which would be incurred by coal producers in separately establishing these facilities during the claim period would have been prohibitive.

  20  In general, however, the coals prepared by the mine washeries are not designed to meet specific export specifications. This is achieved by blending at the PWCS facility in 2 locations at the port of Newcastle.

  21  PWCS is owned by the coal mining companies. It operates a facility at 2 terminals, Carrington and Kooragang within the port of Newcastle. As a company in the nature of a cooperative, it has coordinated all the receiving, blending and coal-loading operations for the export of coal from the port since 1990. It is not a trader in coal but merely provides a handling service.

  22  Some of the mines, in relation to some of the coal transported, require blending services. This is carried out by a process of stacking the coal after it leaves the train in a particular fashion and then retrieving it in such a way, by another piece of machinery, that the required blending takes place. Mr Edwards summarised the situation in these words:

   

60. In terms of clean coals meeting particular specifications there are really three situations:

 (a)  some export shipments contain only one clean coal product of a coal preparation plant. For example during the Claim Period there were export shipments by Oakbridge containing only 14% ash Bulga steaming coal;

 (b)  some export shipments are blends of several component clean coals, with one or more of the components coals exceeding the specification, which are blended with other component coals which are outside specification, with the aim of just meeting the specification, or incurring only small penalties;

 (c)  some export shipments are blends of individual component coals none of which satisfy all the contract specifications, but the blend does. An example is described at paragraph 36 of Mr Isherwood's statement.

 

In my experience each of these situations occur. However I would not be able to estimate what total proportion of coal exported through PWCS fitted each situation. Export shipments containing only one clean coal product do not need to be blended to meet export specifications.

  23  PWCS not only blends coal when requested, but also operates a magnet during transportation of the coals within the facility. The purpose of this is to detect and remove foreign metal. In the course of mining (and possibly in the course of transport carried out by the applicants) all sorts of extraneous objects fall into the coal. These include broken portions of loaders, a fire extinguisher (as one photograph showed), lumps of concrete (which would not be detected by the magnet) and general scrap or tramp metal. Unless this material is removed, it can damage the facility in the purchaser's steel mill or power station.

  24  Mr Goodwin, of PWCS, described the process of receival and magnet detection as part of the integrated operations for loading on to a vessel. To coordinate train departures and sailing times, schedules were prepared to link both and to give exporters appropriate information. Describing the arrival of the coal, Mr Goodwin said:

   

31. Before arriving at each receival point, the coal wagons pass over one of two registered weighbridges to determine the quantity of coal hauled. Each train hauls between 2,100 and 8,600 tonnes of coal. A wagon weighing facility is operated by the Applicants prior to entry onto the PSCS balloon loops.

 

32. Upon reaching PWCS, the coal wagons then pass over one of four receival hoppers. The coal is emptied through bottom discharging doors, through a metal grate, into the receival hopper. At Carrington, the coal is taken, by conveyor, to a large surge bin for temporary storage before being placed on another conveyor for transport to the stockyard. At Kooragang coal passes directly from the receival hopper to the conveyor for transport to the stockyard. Annexed and marked "IG7" is a picture of a coal dumping station at Kooragang.

 

33. During the transportation from the receival hopper to the stockyard conveyor, the coal is passed through a powerful electro-magnetic field. The magnetic field allows the passage of the coal but extracts metal contaminants.

  25  After coal is sampled to determine its properties for export purposes, it is then stacked in particular ways layering coal of different grades one upon the other and blending the layered stockpile of coal by re-claiming at a pre-determined angle. The methods of stacking are different at Kooragang and Carrington but essentially the same procedures are carried out at both terminals.

  26  The blending technique at Carrington (which the applicant claims to be part of the beneficiation process) was described by Mr Goodwin as follows:

   

45. The blending technique used at Carrington is a modified "windrow" stacking pattern with a slew (end cut) reclaimer. This method involves a ground mounted travelling stacker with a conveyor feed, laying coal along the length of the stockpile. The length of the stockpiles vary with the shipment size but in general stockpile lengths range from 50m to 300m.

 

46. The stacker collects coal from the conveyor and distributes it in small linear ribbons by moving down the stockpile. The linear ribbons of coal are built on top of one another by uniform passes of the stacker along the length of the stockpile until it reaches a height of between 13-15 metres.

 

47. The next step of blending occurs when the travelling, slewing, luffing boom type bucket and wheel reclaimer reclaims the stockpile. The reclaimer straddles the conveyor and moves up and down the length of the stockpile on rails. The reclaimer makes passes over the full face of the stockpile, end on. Each full face pass, by the bucket wheel reclaimer, recovers approximately 120 tonnes. Annexed and marked "IG12" is a figure that diagrammatically represents the reclaiming technique employed at Carrington.

 

48. As the reclaimer traverses the stockpile, a cross-section of the stacked ribbons of coal is cut from the stockpile. This has the effect of blending the different grades of coal stacked on top of one another. The ultimate result is a blended uniform coal product which satisfies the market specifications. The blended coal is then transported to the surge bin for sampling and loading.

  27  Once reclaimed from the stacks, the coal is transported through a conveyor to a surge bin. Once again, sampling takes place and once again the coal is passed through a second electro-magnetic field designed to remove any metal fragments that may have been incorporated into the coal at PWCS or may have been missed by the first magnet. The final product is then loaded on to a waiting vessel.

  28  Blending also takes place at the steel mill or power station owned by the purchaser. Mr Edwards described it in these words:

   

13. Over the years I have visited many major Asian steel and power company consumers of coal. I am also aware through reading of the blending practices of coal consumers. Blending of several overseas coals, and any domestic sourced coals, has been standard practice at steel mills for many years and is becoming routine in the power industry. Blending at steel mills is particularly sophisticated. A Japanese or Korean steel mill will typically purchase over 10 (and up to 30) different brands of clean coal from several countries and blend them in carefully calculated proportions using stockpiles and/or bin blending techniques. This is often a two stage process with the final blend being made from several blended stockpiles to suit the particular operational requirements as they arise.

 

14. There are limits to what blending can achieve. Regardless of the method and component coals used there will still be variability of quality in the blend, eg there will be a standard deviation from the average ash content. Coal particles from the blend may continue to behave as discrete particles of the individual components, rather than similar to the "average" coal particles. Whilst some of the quality parameters are mathematically averageable from the individual components (ie additive), some are not. Quality parameters that are additive include ash content, specific energy, moisture and sulphur. Quality parameters that may or may not be additive depending on the component coals used are ash fusion temperatures, hardgrove grindability index and some coking parameters. For such reasons most exported blends are usually made up of coals with similar quality values. For example, it is not normal to include high ash coals in coking coal blends.

  29  The applicants' submissions depend largely upon the judgement of a full court in Regional Director of Customs (WA) v Dampier Salt (Operations) Pty Limited (1996) 67 FCR 108. In that case, the evidence was that the partly-evaporated salt solution could have been sold into the domestic market where there was some demand for its use in swimming pools. However, the evidence in that case was that the domestic market had been fully satisfied and that, accordingly, there was a commercial imperative that the salt solution be further dried so as to be sold in the export market. At 113, their Honours said:

   

It may thus be concluded that effectively the salt produced by Dampier is saleable only as bulk sea-borne trade salt and in accordance with the specifications required by purchasers in that market.

  30  The decision introduced (or as their Honours would say, confirmed) the concept of economic considerations in determining whether or not recovery had taken place. At 115 their Honours said:

   

In State Rail Authority (NSW) v Collector of Customs (1991) 33 FCR 211 at 215, a Full Court of this Court (Beaumont, Burchett and Foster JJ) pointed out that the definition of "mining operations" in the present context had as its central reference point the recovery of minerals. Hence, in the context of salt production, the reference point is the recovery of salt. But so to express the problem is to expose an ambiguity which reaches to the heart of the issue between the parties. It is clear that a point must be reached where the process of recovery of the mineral (the mining operation) will have come to an end and some other process, be that called treatment or preparation for marketing or preparation for sale, will have commenced. The difficulty is to define when that point occurs.

 

There are three potential approaches which can be adopted. The first approach is that mining operations (ie in the present case, salt production) will cease when there has been produced something which is recognisable as the mineral, here common salt, even if there be no market for the substance produced in that form and irrespective of the market in which the claimant for a rebate operates. The second is that the mining operations will come to an end as soon as there has been produced something (being a mineral) for which there is a market (i.e. in the present case, salt) irrespective of whether the person claiming the rebate operates in the market. The third approach is that the mining operation will only cease when there has been produced by the claimant to the rebate minerals (ie in the present case, salt) which it can market in the market in which it operates.

  31  The third approach described above was adopted by the court. It held that recovery was not complete until there had been produced minerals in a form which could be marketed in the market in which the producer operated.

  32  Their Honours saw some support for this view in Collector of Customs v BHP Australia Coal Limited (1994) 53 FCR 499 with the reference by the court in that case to a "useable end product". They went on to say (at 116):

   

It must be accepted that the case was concerned not specifically with the words "mining for minerals" but with the provisions of par (ca) concerned with beneficiation of minerals. However, that paragraph limits the beneficiation of which it speaks to the beneficiation which is an "integral part of the operations … for the recovery of minerals", and there can be little doubt that the mining operations extend to the recovery of the relevant mineral to be mined. More importantly, however, the case suggests that a practical commercial approach should be adopted to the interpretation of the legislation so that the mining operation should not be taken to conclude until at the very least there came into existence a mineral which was commercially saleable.

  33  Their Honours also considered that support for this proposition could be found in Abbott Point Bulk Coal Pty Limited v Collector of Customs (1992) 35 FCR 371 at 379. I have some difficulty in reconciling the conclusion drawn by the Court in Dampier with the observations of another full court in Abbott Point, which their Honours quoted at pp 116 and 117. However, I am of course bound by the terms of both decisions. I have quoted the relevant passages in Abbott Point later in these reasons.

  34  The cases were summarised in Dampier at p 117 by the court:

   

These cases stand as authority for the proposition that the process of recovery of a mineral will not necessarily be complete at the first time the mineral can be identified as having been separated from that in which it was embedded. Rather, there must at least be found a saleable product, but there too, the mere emergence of a saleable product from the extractive process will not mean that the process of recovery of a mineral has been complete, especially where the saleable product is not that which is the intended outcome of the mining operation.

  35  As their Honours said at p 118, it is important to consider the desired end product of the [applicants] both in the corresponding tax cases to which they referred, and (it follows) in diesel rebate cases.

  36  From these cases, their Honours drew 6 conclusions at p 120 as follows:

   

From these cases the following propositions may be extracted:

 

1. The point where a mining operation starts and finishes will be a question of fact to be decided in each case. However, the Court should not adopt a narrow view of the extent of "mining operations" so as to frustrate the legislative intent of providing a concession to the mining industry.

 

2. Relevant to this factual conclusion will be the ascertainment of the object of the particular taxpayer's operations.

 

3. Generally the mining operation will continue until there has been produced that which is the object of the particular taxpayer's operation of mining.

 

4. The mining operation will not necessarily be complete when a mineral has been extracted from ore, or where salt is produced, immediately there has been a recognisable salt product, be that brine or crystallised salt. It will be necessary that the mineral (salt) produced be saleable.

 

5. The mere fact that a mineral is saleable will not necessarily be determinative, if the production of that mineral at that place by that taxpayer would be uneconomic. Perhaps everything can be said to be saleable for a price, but what is necessary is that the mineral in question be economically saleable at least by a person in the position of the particular taxpayer.

 

6. Activities directed to improving that which is extracted, for example pelletising, may fall outside the ambit of the "mining operation". However, they may form part of the mining operation where the activity is closely associated with the actual extraction of the mineral. Normally this close association may be indicated by physical proximity, but lack of physical proximity will not necessitate the conclusion that the mining operation has concluded: Northwest Iron. The degree of integration of the activity with the actual mining process will, obviously, thus be relevant.

  37  It was this case that led to the amending legislation. The second reading speech given by the Minister on 12 December 1996 introducing the legislation is useful, not only because it states the intention of the Government (and presumably of Parliament) in relation to the amending legislation. It also sets out what, in the Minister's view, Parliament had intended the preceding legislation to mean. This speech is extrinsic evidence that the statutory interpretation adopted by the court in Dampier was not that intended by Parliament. In the first of the 6 propositions, the court in Dampier made specific reference to a legislative intent of providing a concession to the mining industry. It would seem from the Minister's speech that the legislative intent may have been narrower than that perceived by the court. The Minister said:

   

There have been several decisions in recent times which have had the effect of expanding eligibility under the scheme beyond what the government believes was intended, with consequent effects on outlays. In some areas, the potential financial impact of decisions is very significant.

 

The particular amendments will ensure the continuation of rebate for diesel fuel used in carrying out mining activities but will preclude from eligibility certain activities, best described as undertaken for economic-marketing reasons, rather than the physical extraction of minerals, and activities which essentially involve the transportation of inputs-material for mining or beneficiation.

 

The government's clear intention is that rebate paid under the legislation should be confined to the narrow definition of eligible activities in the legislation - that is, the intention is not that the legislation be defined broadly and beneficially.

 

The amendments proposed in this bill are designed to tighten and narrow eligibility. It is the government's intention to continue to adopt such an approach in the face of any future broadening.

 

The most significant decision which has potential for expansion in eligibility related to an appeal by Dampier Salt (Operations) Pty Ltd against a decision of the AAT in relation to the point at which payment of rebate on the recovery of salt ceases.

 

The Full Federal Court's judgment is considered to be the most far reaching ever delivered in relation to the diesel fuel rebate scheme. It represents a fundamental shift from a scheme based on the concept of an activity, in this case mining, being regarded as a physical act, that is the extraction of a product from the ground, to a concept of the activity being an economic one.

 

The Federal Court found that even though Dampier Salt's product could be sold in the condition it was in at the first stockpile, it was uneconomic for the company to do so. It was only economic to sell into the market it actually supplied. The court determined the second stockpile activities were so closely related to the process of extraction of salt from the brine in which it was embedded, that they fell within the concept of mining operations. The government has never intended to pay rebate to these types of operations.

 

The amendments to the definitions, particularly beneficiation, make it clear that the physical act of mining or beneficiation is eligible for rebate. It ensures the payment of rebate does not extend to activities involved in getting the product to the marketplace, such as the broad economic factors which were the basis of the full Federal Court judgment.

  38  The Minister, in emphasising the objective test that should be applied in determining whether there was beneficiation or recovery, said:

   

The government considers that it is wrong to apply the concept that an activity is eligible for rebate because it is integral to another eligible activity. It is the intent of the diesel fuel rebate scheme to pay rebate only on those activities that are explicitly mentioned in the legislation and not to activities that are said to be integral to, associated with or connected with these activities.

 

…

 

Similarly the AAT and Federal Court have considered the question of transport of materials-inputs to mining operations and beneficiation in recent times. Rebate is intended to be paid for beneficiation of minerals and ores, including transport where such beneficiation occurs at a place removed from the actual place of mining operations. Rebate is not intended to be paid for the transport of goods-materials-inputs for mining operations or beneficiation.

 

…

 

The amendment to the definition of "minerals" will restore the original intent of the scheme that a mining operation must be in relation to a natural mineral. The amendment will also sharpen the focus on the beneficiation activities that are intended to be rebatable.

  39  Relying on Dampier, the applicants submitted that what was done by PWCS was part of the process in making the mineral "economically saleable by a "person in the position of the particular taxpayer"". They submitted that the object of the miner was to fulfil export contracts by providing coal which had the required physical and chemical characteristics. Coal producers, they submitted, carry on mining operations with the objective of maximising economic efficiency. What was done at PWCS could not economically be done at the mine.

  40  Again relying on Dampier, the applicants submitted that in the present case, the nature of the operations of the coal producers was critical to identification of the scope of the mining operations and when "recovery" of the object of those operations was complete. The object was the production of coal suitable for sale to export customers and recovery of that product was only complete when the blending had occurred at PWCS.

  41  In the fifth principle set out in the Dampier collection of 6 principles, their Honours referred to the production of a saleable product. It was the applicants' submission that, as in Dampier, the domestic market for "export coal" was saturated and static. In the claim period, nearly 70% of the coal produced in the coalfields could only be sold into the export market. Evidence of minor sales of clean coal to other coal producers (and coal was sold as between producers to help them fulfil export contracts and as between producers and dealers) assisted (so it was submitted) rather than detracted from the commercial reality that the clean coal was produced with the intention that it be blended and sold in the export market.

  42  At the hearing, objection was taken to all those parts of the witness statement of Mr Edwards in which he sought to put forward an expert's view as to the meaning of beneficiate. It was submitted that the meaning of "beneficiation" as used in the statute must be ascertained as a matter of ordinary English meaning. As authority for the proposition that "beneficiation" is an ordinary English word, the applicants referred to the judgement of French J in Chief Executive Officer of Customs v Western Australian Government Railways Commission [1999] FCA 1465 at para 40. That being so, it was submitted that it was inappropriate to have regard to the evidence of an expert to ascertain its meaning. For this proposition, the applicants relied on the comments of Hill J in Pepsi Seven-Up Bottlers Perth Pty Ltd v FCT (1995) 31 ATR 445 at 452; 95 ATC 4746 at 4752. I will deal with the objection to Mr Edwards' evidence later in these reasons when dealing with the meaning of "beneficiation".

  43  In relation to the removal of metal and other contaminants through magnetic processing, the applicants relied on the economic importance to the purchaser of this tramp metal being removed as constituting part of the process of beneficiation. If the general economic argument is not open to the applicant, then this submission is also not available to the applicant.

  44  Finally, in relation to the July 1997 amendments (particularly subcl (7C)) the applicants' submitted that the words "no regard is to be had to any market considerations that might affect the decision to subject that mineral or those ores to that process" were not apt to catch steps taken in the present case to qualify a recovered mineral for sale in a market. The applicants again submitted that the whole mining operation was carried on to produce that export-quality coal and the beneficiation was part of that and was not a separate market-driven decision.

  45  In many ways, the decisions of full courts of the Federal Court, differently constituted, in Abbott Point and BHP Australia, are difficult to reconcile with Dampier Salt. Neither of these judgments has been overruled or doubted. I am, of course, bound by both. If there had been no relevant decision since Abbott Point, the result of the present application would be quite clear. It is difficult to see any essential differences between the facts of this case and the facts in Abbott Point. There was a similar system, in that case, for getting coal from mines to overseas customers, including a blending process at the port facility. The blending consisted of a layering of different levels of coals in the ship. To my mind, however, the stacking and recovery process used at PWCS is not essentially different. In Abbott Point, the blending that took place was held not to amount to operations for the recovery of minerals. In determining when recovery was complete, a majority of their Honours said at 378 and 379:

   

Whether an activity falls within the definition of "mining operations" as defined in s 164(7) of the Customs Act 1901 (Cth) is a question of fact. So too is the question of when recovery is complete. In each case a commonsense and commercial approach has to be taken to the question having regard to the evident purpose of the legislation, to make rebates available to promote the exploitation of mineral deposits in Australia. However, a point is reached where the mineral has been recovered and what is done with it thereafter is the use or processing of it for its better use as a mineral.

 

…

 

The process of recovery includes, in our view, those steps which are taken by a miner before sale, by whatever process, to remove the mineral from that in which it is embedded or with which it is intermixed. Such a process comprehends the refining of minerals or ore to remove impurities naturally occurring in the material as it has been mined. Once the process of separation or refining has been completed, to subject the mineral to a process or procedure designed purely to facilitate its better use as so separated or refined or to render it more readily or advantageously marketable is not in our view part of the recovery process.

 

In the instant case the coal, as coal, was recovered when it was washed and stockpiled at the mine sites. No further step was taken to separate the coal from foreign material adhering to it or intermixed with it for the purpose of improving the product by separation. What occurred thereafter was an operation designed to place clean coal on board ships in such proportions as to create a combined product with an ash content of 15 per cent, or whatever other content was necessary, to satisfy requirements of a particular buyer. It was a process designed to best utilise the lower grade coal as coal.

  46  In a separate judgment, French J, in effect also held that recovery did not end after the process of economic enhancement had been completed. He said (at 389):

   

The construction to be given to the word "recovery" and the larger phrase of which it forms a part must take into account the legislative policy of these provisions which was identified by a Full Court in Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271 at 275 when it was said: "The relevant provisions of the Excise Act 1901 (Cth) reflect a legislative policy of encouragement of mining operations and should not be given a narrow application." There is nothing in the concept of recovery which requires the conclusion that it ceases when a vendible product is produced. The mere excavation and stockpiling of a mineral may yield a vendible product. Even reject material in tailings dumps can attract buyers. Whether a product is vendible depends upon whether somebody is prepared to pay for it. While some concept of utility or commercial value may be inherent in the idea of recovery, there is no warrant for the conclusion that it is a process which ceases upon first production of a saleable product. Such a restrictive construction of the term "recovery" is, in my opinion, not mandated by the language of the subsection and seems antithetical to the legislative policy. In making the finding it did on this point the Tribunal, in my opinion, erred on a question of law. But, in the event, the error was irrelevant to the outcome of the case. For whatever effect is given to the word "recovery" it does involve the notion of separation of material and was a process which, on the Tribunal's findings of fact, had ceased by the time the coal was delivered to Abbott Point.

 

The question remains whether the so-called "blending" of the coal at the port could be regarded as an integral part of the recovery operation. It may be accepted that the technique of mixed loading adopted at Abbott Point for achieving contractually specified ash contents made use of coal which might otherwise have been unsaleable. It may also be accepted that the process was an element of an integrated plan for the extraction, preparation and delivery of coal from the two mines. It would nevertheless be an abuse of the English language to describe it as "an integral part" of the recovery operation. To say that there is a close connection between recovery and mixed loading or that the recovery process would be different if the "blending" procedure had not been adopted is not to say that the latter is an integral part of the former.

  47  French J pointed out (at p 390) that the definition of the word "beneficiate" in the Oxford English Dictionary shows that it was derived from the Spanish word "beneficiar" which means "to benefit, or derive profit from a mine or to reduce ores". The applicants sought to derive some comfort from the reference to the economic associations of the word. However, as both the dictionary and his Honour make clear, that reference arises out of the historical development of the current meaning. The dictionary attributes the origin to the Spanish word but goes on to state the meaning, namely "to reduce (ores)". Whatever the origin of the word, the current English meaning, according to this Dictionary, is to reduce ores. It is interesting to note that the lexicographer has also referred to technical dictionaries as illustrations of the development of this meaning.

  48  Notwithstanding what was said by the majority in Abbott Point, another full court in BHP Australia observed (at 509):

   

On a full consideration of the judgments in Abbott Point we are quite satisfied that the court did not purport to lay down any general proposition that recovery of coal was complete when coal was loaded on to a product stockpile at the mine site. In Abbott Point the coal preparation operations, on the evidence in that case, were finished before reaching the mine stockpile and it was for that reason that Ryan and Cooper JJ expressed the view that recovery was complete when coal was loaded onto that stockpile. However, it is a question of fact in each case when recovery has occurred. How the question will be answered will depend upon the nature of the mineral sought to be recovered and the process undertaken to recover it. It may not be a simple process of physically separating the mineral from any material adhering to it or intermixed with it. It may, for instance, involve as part of the process of recovery the removal of material or substances introduced during the process for the purpose of recovering the mineral. Also, it may involve as part of the process of breaking down and reconstitution of the mineral.

  49  Even in this passage, however, the tests of recovery put forward by the court are objective tests, dependent upon processes physically administered to the raw product. It is in this sense that I understand the court's use of the words "useable end product" in the following passage appearing at p 510:

   

Additionally, it would appear that the detailed evidence given as to the nature of "coal" in the present case was not given in Abbott Point. It is apparent, however, from the evidence given in this case, that coal cannot be recovered in a pure form in the same way as a metal. Of its very nature it exists in different grades and compositions. The very processes of extraction and refinement which, in the case of a metal, produce a pure product, in the case of coal, fragment the mineral into particles of different size and grade which require that they be later mixed in an appropriate way to produce a satisfactory end product. The evidence indicates that this is so, even if the end product so produced does not meet the particular specification of a customer. The more so, of course, if the object of the whole process is to meet such a specification. It would seem, therefore, that in the case of coal the separation process is not complete until the segregated particles are dewatered and remixed into a homogenised whole. It is at that point that the coal can be regarded as "recovered". It is not until this process is complete that a useable end product is achieved. And this is so, even if, thereafter, additional operations are required to meet a specific customer's requirements.

  50  Both Abbott Point and BHP, in my view, support the proposition that beneficiation is a technical mining process and not one that is defined in terms of commercial or market considerations and recovery is completed when the beneficiation process is complete. It is also my view that this conclusion is consistent with the decision of the Court in Dampier.

  51  That case involved a claim under para (g) of the definition of "mining operations" and was not a claim involving questions of beneficiation. More importantly, however, the facts in Dampier were that the salt was refined by evaporation, to the point of becoming a vendible product in the first stockpile. It was then moved to a second stockpile where further drying of the salt occurred. It was directly as a result of the further drying that the salt produced was more valuable, and that consequently there was more demand for it. The comments of the full court must be understood in the context of a process where the "recovery" process was still capable of being construed as continuing because waste water was being removed throughout the process, as de-watering occurs in the beneficiation of coal. On p 115, the court made it clear that recovery is to be distinguished from treatment of the product for the purpose of marketing or sales. The applicants' case, on the other hand, depends upon the view that blending, as a treatment done for marketing and sales purposes, is itself part of the recovery process.

  52  Beneficiation was not dealt with in Dampier. The court was not called upon to deal with the meaning of the term, or even to consider whether the term was an ordinary English word, because the claim related to salt, a substance treated separately in the then relevant definition. There may be some conflict of views as to whether "beneficiation" is an ordinary English term. In Abbott Point, at 374, their Honours said:

   

It is clear, in our view, that "beneficiation" is not a term in ordinary English usage. It is a technical term applicable to a range of processes in the mining and metallurgical industries. Accordingly, its meaning is to be determined as a question of fact. (See eg Max Cooper & Sons Pty Ltd v Sydney City Council (1980) 54 ALJR 234 at 239.)

  53  On the other hand, the full court said in BHP Australia at 501:

   

The words "beneficiation" and "recovery" are not the subject of statutory definition. Their meaning was the subject of expert evidence in the case. It is not contested that it was appropriate for such evidence to be given, the words being non-legal technical terms. (Abbott Point Bulk Coal Pty Ltd v Collector of Customs (1992) 35 FCR 371 at 374.)

  54  As I have indicated, the word appears in the Oxford English Dictionary. In the Macquarie Dictionary, "beneficiation" is defined as "1. The dressing or processing of ores to regulate the size of the product, remove unwanted constituents and improve the quality, purity or assay grade 2. Concentration or other preparation of ore for smelting by drying, floatation, or magnetic separation." Australian usage, therefore, regards "beneficiation" as an objectively observable process. Whether or not the word is an ordinary English word, however, it is permissible to consider expert evidence in explication of its meaning, not to attribute any special or trade meaning to the word but to understand how the word is ordinarily understood. This also applies to the word "recovery". The passage quoted from BHP Australia above indicates the appropriateness of this course. It has also been followed and referred to with approval in other cases.

  55  Direct authority for the proposition is to be found in Chief Executive Officer of Customs v Tasmanian Electro-Metallurgical Co Pty Limited (1997) 76 FCR 476, where Merkel J said (at 485):

   

In summary, the AAT approached its task in the present case in a manner which is consistent with the principles stated by the High Court in Agfa-Gevaert. In that regard the AAT concluded that:

 •  the words "minerals", "beneficiation" and "recovery" as used in s 164(7) did not have a special meaning. Accordingly, their meaning was a question of fact for the AAT

 •  evidence, albeit conflicting, as to the meaning attributed to those words by persons involved in or connected with the mining or metallurgical industry assisted it to determine the ordinary meaning to be given to the words in the context in which they are used in s 164(7)

 •  the ordinary meaning of the words, as determined by it, was the appropriate meaning to be given to the words when construing, as a whole, para (b) of the definition of "mining operations" in s 164(7).

  56  This was followed in Chief Executive Officer of Customs v West Australian Government Railways Commission (1999) 43 ATR 78 by French J. His Honour also noted that it was appropriate for the tribunal to have regard to expert evidence on whether particular processes may be characterised as being "in beneficiation". Although the meaning was not to be exhaustively determined by expert testimony, it is appropriate that such evidence be considered and weighed, even though the word was not a technical one. Similar views were expressed by Sackville J in Australian Native Landscapes Pty Limited v Collector of Customs (1997) 24 AAR 353 at 359-360. In that case, his Honour also referred to the principle that in legislation dealing with revenue or rebates, a court is generally ready to conclude that the statutory language is intended to be understood in accordance with common commercial or trade usage.

  57  I have therefore been assisted by the evidence of Mr Edwards in affirming the ordinary meaning of both "beneficiation" and "recovery" recorded in the Oxford English Dictionary and the Macquarie Dictionary. I have also been assisted (as were the authors of the Oxford English Dictionary) by quotations offered by Mr Edwards from various technical dictionaries and learned papers referred to in his evidence as to the meaning of these terms.

  58  The meaning given in Australian Standard AS2418 of "beneficiate", namely "to increase the commercial value of a coal by appropriate treatment" is too vague and general to be of assistance in the particular circumstances of this case. It is clear from all the definitions and evidence of usage, that beneficiation consists of the removal, through cleaning, of high-ash particles. The washing process described in para 18 of these reasons is an example of what is meant by beneficiation in this context. The terms "beneficiate" and "beneficiation" are not, according to the evidence, ever used to refer to the blending of clean coals. Those terms are commonly and consistently used in Australia and internationally to refer to the separation and removal of impurities by cleaning.

  59  It is also clear from the usage quoted by Mr Edwards that beneficiation cannot extend to the removal of unwanted jetsam through magnets. Beneficiation is the removal of naturally occurring waste matter.

  60  The statement of Mr Edwards establishes that beneficiation refers to this process and establishes that the blending of coal (whether or not to meet contract specifications) is not the beneficiation of coal. Mr Edwards' evidence was unchallenged, except in the legal sense of being inadmissible (or, in tribunal terms, irrelevant) in ascertaining the ordinary meaning of the expressions "beneficiation" and "recovery". No evidence in reply was put forward by the applicants seeking to show some other ordinary meaning that should be applied to the expressions.

  61  These meanings cannot extend either to coal blending or to rubbish removal. I use the term "rubbish" in the sense defined in the Macquarie Dictionary as debris or litter, or worthless stuff or trash, not as waste or refuse material. There may be broken pieces of mining tools, coal crushers, coal conveyors, or even parts of stackers and reclaimers that have fallen into the coal. There may even be garbage left in the coal by miners or in subsequent coal handling. Although the removal of this kind of debris is important to protect both the coal handling equipment and the customer's installation, it forms a very small part of the operations carried out by PWCS. Its characterisation, however, does not depend upon the extent of the process during these operations. Rubbish removal, by its very nature, cannot be said to be beneficiation. The evidence of Mr Edwards (which I accept) was that he had never heard the use of magnets by export facilities or by consumers being described as beneficiation. There was no evidence from the applicants that such procedures did in fact constitute beneficiation.

  62  Mr Edwards' evidence also extended to the meaning of the word "recovery" in ordinary English and as understood in the trade. Both meanings coincide. He gave examples of recent published uses of the words "recovery" or "recover" in the Australian coal industry context. His conclusions on the basis of his experience and research were that the "operations at PWCS clearly do not involve any operations for the recovery of coal in the sense of extraction and separation". The operations for the recovery of coal are wholly carried out at the mining site and the coal preparation plants during which raw coal is first recovered from the ground and then clean coal is recovered from the raw coal by separating and removing undesirable constituents. That evidence again is uncontradicted and, in my view, is a correct statement of the ordinary current usage of the relevant words in the relevant trade.

  63  To hold, as the applicants submitted, that recovery could not be regarded as having been completed until the end product was sold must be wrong. If the applicants' submission is correct, then recovery must include marketing and sales. This ignores the distinction between "the process of recovery of the mineral and processes for its "treatment or preparation for marketing or preparation for sale"" which the court adopted in Dampier, a case particularly relied upon by the applicants.

  64  For these reasons, I consider that in relation to most of the claim period the fuel in question could not be said to have been purchased by the applicants for use by them in mining operations, as defined in the earlier Act. The applicants' submissions cannot succeed in respect of the last three months of the claim period, because of the specific provisions of the amending Act negating the very basis upon which the applicants rely.

  65  The decisions under review are therefore correct and preferable and will be affirmed.