Federal Commissioner of Taxation v. Reynolds Australia Alumina Ltd. & Ors.

Members: Beaumont J

Wilcox J
Burchett J

Tribunal:
Full Federal Court

Decision date: Judgment handed down 26 November 1987.

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Wilcox J.

I share the view of Beaumont J. that this appeal should be dismissed [reported at 87 ATC 4305]. I would not myself be prepared to uphold the claim for exemption by reference to Item 14(1) in the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935. It seems to me that the conveyance of the bauxite from the mine site to the refinery site is neither a mining operation nor the treatment of the product of a mining operation. It is simply a transport operation.

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ATC 5029

With respect to Beaumont J., I do not find persuasive the factors which influenced him in coming to the conclusion that the operation of the conveyor is part of the mining operations. Any transportation of mine product has to commence from within the mine site. The real question is whether, at the stage when transportation begins, there is in existence a usable product: see
F.C. of T. v. Broken Hill Pty. Co. Ltd 69 ATC 4028 ; (1968) 15 A.T.D. 43 ; (1967-1969) 120 C.L.R. 240 and
F.C. of T. v. ICI Australia Ltd. 71 ATC 4253 ; and 72 ATC 4213 ; (1971-1972) 127 C.L.R. 529 each of which is discussed by Beaumont J. There is such a product by the time that the crushed bauxite is stacked at the surge pile to await transport from the mine site.

It is true that, in this case, the transport of the bauxite to the refinery is part of a continuous process controlled by a single consortium. The same may be said of the transport of the alumina from the refinery to the wharf at Bunbury; but nobody would describe that as a "mining operation". The position is that, for good economic reasons, the respondents have established a single project which integrates the first two of the three major stages needed to produce aluminium: the mining of the bauxite, the refining of the bauxite into alumina and the smelting of the alumina so as to produce aluminium. But they remain separate stages, each with their own separate characteristics. The fact that the first stage, which is a mining operation, is part of the total project does not mean that other stages are part of the mining operation. And the facts that the transportation of product from one stage to the next is carried out by the respondents themselves, rather than through contractors, and by fixed plant, rather than by road or rail, does not make the transportation part of either stage.

As to the second leg of Item 14(1), the treatment of the products of mining operations, I respect the contrary view but cannot myself regard the mere transportation over a distance of 51 km of partially blended bauxite as "treatment"; notwithstanding the fact that, upon arrival at the refinery site, further blending occurs. This is not a conveyance in the course, and for the purpose, of blending operations. The purpose of the conveyor is to take the bauxite from the place where it is won from the ground to a place which is suitable for the production of alumina. It happens to be convenient to carry out some blending at each end of the conveyor. Stacking at each end of the conveyor being necessary in any event, the designers of the process used the opportunity to achieve some blending in the course of loading and unloading the stacks. If it were enough that treatment take place on either side of a conveyance for other purposes, it is difficult to see why transportation could not always be characterised as treatment.

Counsel for the respondents placed primary reliance upon Item 113C of the First Schedule. I think that they were correct to do so. Item 113C grants exemption to "aids to manufacture" and this term is defined by reg. 4(1) of the Sales Tax Regulations in such a manner as to include machinery for use in transportation. The transportation must be carried on by the registered person in the course of business "within premises" in which one of the activities specified in the paragraph is carried out. The specified activities include "the actual processing or treatment of goods to be used in, wrought into or attached to goods to be manufactured". The phrase "goods to be used in, wrought into or attached to goods to be manufactured" is defined by the regulations as meaning "goods to be so used or dealt with that those goods, or some essential element thereof, will form an integral part of the goods to be manufactured". The blending of the bauxite - both at the mine site and again at the refinery site - answers the description of an actual processing or treatment of goods to be used in goods to be manufactured. Moreover, the activities specified in the paragraph include the actual processing or treatment by which the goods to which that processing or treatment is applied are used in, wrought into or attached to goods to be manufactured. The refining process falls within this description.

It follows that, if the conveyor is within the same "premises" as either or both of the mine or the refinery, the exemption is available. As Beaumont J. has said, the critical question is "whether it is appropriate to describe the whole of the lands used by the respondents for the purposes of the Worsley project as a single set of premises".

At first sight it may appear incongruous to regard as a single set of premises two substantial areas of land, upon which different industrial activities are carried on, and their

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ATC 5030

linking corridor 51 km in length. But I see no reason why the term "premises" in the relevant definition should be read so as to exclude such a result. The term "premises" is capable of application to vacant land. There is no implication in the definition that all parts of the premises be held subject to the same instrument of title, or even the same tenure, and there is no limitation as to size. Where a particular person holds a parcel of contiguous land, regardless of title or tenure, for the purpose of conducting a single integrated activity, it is not inappropriate to describe the whole of that land as a single set of premises. As was submitted on behalf of the respondents, even if the conveyor itself is used neither for mining operations nor for the treatment of mining products, the whole area actually occupied by the respondents constitutes the premises, within which they conduct an integrated business activity consisting of those disparate parts.

I think that the decision of Kitto J. in
Moreton Central Sugar Mill Co. Ltd. v. F.C. of T. (1964) 116 C.L.R. 151 , also discussed by Beaumont J., supports this conclusion. That case turned upon different legislation, relating to investment deductions, but the language of the relevant provision was not dissimilar to that under present consideration. A question arose whether the tramline system, 61 miles in length, for which the taxpayer had acquired the relevant rolling stock, was within the "premises" within which the taxpayer manufactured goods. The actual manufacturing activity consisted of the crushing and milling of sugar cane. The total area of land served by the tramlines is not disclosed in the report of the case, but it must have been considerable. This did not cause any difficulty, so far as Kitto J. was concerned. The claim failed because the appellant held only an incorporeal right over the land over which the tramline was constructed. It appears to be clear that, if the appellant had owned or leased the land traversed by the tramline, the tramline would have been regarded as being within the same "premises" as the mill.

For these reasons, which accord with those of both the learned primary Judge and Beaumont J., I am of the opinion that the claim for exemption under Item 113C should succeed. I agree with the order proposed by Beaumont J.