Federal Commissioner of Taxation v. Totalisator Administration Board of Queensland

Judges: Thomas J
Derrington J

Ambrose J

Court:
Supreme Court of Queensland (Full Court)

Judgment date: Judgment handed down 4 September 1989.

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Ambrose J.

I have had the advantage of reading the draft reasons for judgment of Thomas J. who has adequately set out the relevant facts and I am in argument with that judgment.

I wish merely to make a few observations of my own in addition.

The liability to pay sales tax is imposed by sec. 19 of the Act. Under that section a ``manufacturer of goods'' which are manufactured in Australia is liable to pay tax if one of three specified conditions is satisfied:

• (a) the goods are sold by the manufacturer to a person who is unregistered under the Act or to a registered person who has not quoted his certificate in respect of the sale, or
• (b) the goods are treated by the manufacturer as stock for sale by retail, or
• (c) the goods are applied by the manufacturer to his own use.

The scheme of the Act is dealt with in
D.F.C. of T. (S.A.) v. Ellis & Clarke Ltd. (1934) 52 C.L.R. 85 . Under the Sales Tax Assessment Act there under consideration Strake J. at p. 88 summarised the effect of the State Act in these terms:

``The Acts emphasize that the tax is imposed upon the sale value of goods manufactured in or imported into Australia. Every person who is a manufacturer or a wholesale merchant must register under the Acts. The tax is not levied upon successive sales, but is one tax levied upon the wholesale value of goods. It is not a tax levied upon the retail value of goods. The scheme of the Acts lays a tax upon the sale value of goods preceding retail distribution.''

Dixon J. at p. 89 et seq. characterised the Act as follows:

``Although the tax levied by the enactments is called a sales tax, it is not a tax upon all sales of commodities. It is a tax levied upon one only of the transactions which commonly take place in respect of goods before they reach the consumer after they are imported into or produced in Australia... The general policy of the legislation is to levy this tax upon the sale of the goods by wholesale, that is upon the sale to the retailer by the last wholesaler. To give effect to this policy, every person who engages, whether exclusively or not, in the sale of goods by wholesale is required to register. Upon registration, he becomes bound to keep proper books, make returns

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ATC 4886

of his sales, and pay the tax. He receives a certificate bearing a number and this certificate he is bound to quote when he buys goods, unless, besides being a wholesale merchant, he is retailer and he sells principally by retail. A sale to a person who quotes his certificate is not the subject of tax, and thus, if there be successive sales to wholesalers, the goods do not incur tax until the last wholesaler sells them to the retailer. Then an ad valorem duty is imposed on that sale, which presumably was considered likely to be at a price higher than the preceding sales. It was not the object of the legislation to levy the tax on sales by retail. But obviously the general policy of taxing the last sale by wholesale, the sale by a wholesaler to a retailer, did not admit of universal application. Manufacturers and importers might themselves sell by retail. Wholesale merchants, although they sold chiefly by wholesale and not principally by retail, owing to the exigencies of commerce might actually sell by retail, owing to the exigencies of commerce might actually sell of goods which had been purchased with the intention of reselling them by wholesale. Manufacturers, importers, and wholesale merchants might take into their own consumption or use the goods they had acquired in the course of their businesses. Moreover, goods are introduced into Australia either by importation or manufacture, and until the tax is levied upon them, their course from that point towards consumption must be capable of check. Elaborate provisions are made in the Acts and regulations to deal with these matters. Manufacturers must be registered and receive certificates. They must pay tax upon the first sale of manufactured goods, unless the buyer is himself registered and quotes his certificate. Manufactures also must pay tax when they take their manufactured goods into use or consumption. The buyer from the manufacturer, if he is or ought to be registered, must pay tax when he sells, unless the buyer from him is registered and quotes his certificate, and he must pay tax if he takes into his own use or consumption the goods he has bought from the manufacturer...''

In
D.F.C. of T. v. Taubmans (N.S.W.) Pty. Ltd. (1966) 115 C.L.R. 570 Windeyer J. took the view that in his observations to which I have referred in D.F.C. of T. (S.A.) v. Ellis & Clarke Ltd. Dixon J. correctly analysed the general purpose and procedure of the scheme of taxation by sales tax and applied those observations to the Act before him. When considering the application of that Act he observed at p. 572:

``The scheme however necessarily involves making some provision for the case of manufacturers and importers who themselves sell by retail, and of merchants who - although they sell chiefly by wholesale and not principally by retail - might actually sell goods by retail and for manufacturers or wholesalers who apply goods they have made or bought to their own use.''

Although counsel for the Commissioner pressed upon us the decision in
M.R. Hornibrook Pty. Ltd. v. F.C. of T. (1939) 62 C.L.R. 272 the relevant facts of that case are clearly distinguishable in my view from the facts in the present case as outlined by my brother Thomas J. It appears from the judgment of Latham C.J. at p. 276 that Hornibrook Highway Ltd. held a franchise for the construction of a bridge across part of Moreton Bay and under the terms of that franchise was bound to construct the bridge and was authorised to charge tolls to persons crossing the bridge after it had been constructed. At the end of the franchise period the highway including the bridge became the unencumbered property of the Crown free from the rights of Hornibrook Highway Ltd. as franchise holder. The appellant in the case was M.R. Hornibrook Pty. Ltd. which had contracted apparently with Hornibrook Highway Ltd. for the construction of the highway including for the construction of the highway including the bridge. The piles were constructed on the shore of Moreton Bay and were then taken out to sea and driven into the sea-bed for the purpose of constructing the bridge.

At p. 278 Latham C.J. pointed out that as the piles lay on the shore they were chattels and they did not cease to be chattels until they lost that character after they had been driven into the sea-bed to become part of the bridge. Thereafter they became part of Crown land - albeit subject to the rights of Hornibrook Highway Ltd. under its franchise. At p. 278 Latham C.J. observed:

``Thus there was in fact no sale of the piles by the appellant to any person whereby that

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ATC 4887

person became owner of the piles before they lost their character as chattels and became part of the bridge. Therefore it is necessary for the commissioner to rely upon some special provision in the Act creating a liability in such a case as the present. Such a provision, the commissioner contends, is found in sec. 3 of the Act. In that section it is provided that `sale of goods by wholesale' includes certain transactions but does not include (inter alia) - `(f) the supply of goods by a person to some other person in the circumstances specified in sub-sec. 4' of the section. Such a supply of goods is deemed to be a sale of goods by retail (sec. 3 - provision following upon par. g).

Sec. 3(4) of the Act, referred to in par. f above quoted, was at the relevant time in the following form: `For the purposes of this Act, a person shall be deemed to have sold goods if, in the performance of any contract under which he has received, or is entitled to receive, valuable consideration, he supplies goods the property in which (whether as goods or in some other form) passes, under the terms of the contract, to some other person.'

In my opinion the commissioner is right in his contention that this provision applies to the present case. The appellant company, in the performance of a contract for building a bridge under which contract it was entitled to receive and doubtless has received valuable consideration, has supplied goods, namely, reinforced concrete piles. Such piles are plainly manufactured articles. They are chattels. They were intended to be incorporated in a structure and were so incorporated. They lost their identity as goods in that structure...

In the present case the property in the piles, not as piles but as an integral part of the bridge, passes to the person who becomes the owner of the bridge, namely, in my opinion, the Crown, but subject, as already stated, to the rights of the franchise holder... in my opinion, the property may fairly be said to pass under the terms of the contract because the property passes by reason of the terms of the contract and of what is done under the contract, namely, the driving of the piles into a position in the bed of the sea which position is intended permanently to be occupied by them. No property ever passes under the terms of any contract if the contract is considered in abstraction from applicable legal principles. Thus, in my opinion, sec. 3(4) of the Act applies to the present case.''

Whether the appellant in that case carried on the business of manufacturing does not appear to have been argued or discussed. The point argued was whether sec. 3(4) of the Act applied.

Section 17(1) of the Assessment Act provides inter alia that:

• sales tax shall be levied and paid upon the sale value of goods -
  • (1) manufactured in Australia by a taxpayer - i.e. by a person chargeable with sales tax under the Act - as defined by section 19,
  • (2) and sold by him,
  • (3) or treated by him as stock for sale by retail, or
  • (4) applied to his own use.

Section 17(2) of the Act provides inter alia that the reference in subsec. (1) of that section to goods manufactured in Australia by a taxpayer and applied to his own use shall be read as a reference:

• (a) to goods manufactured in Australia by a manufacturer in the course of carrying on a business and applied to his own use, whether for the purposes of that business or for any other purpose and whether or not the goods are of a class manufactured by the manufacturer for sale; and
• (b) to goods manufactured in Australia by a manufacturer as provided in subsection (3) and applied to his own use.

The basic contention of the Commissioner is that any person who in the course of carrying on any business (with limited exceptions) manufactures or makes anything for his own use in the course of carrying on his business is a ``manufacturer'' within the meaning of sec. 17 and 19 of the Act and so liable to pay sales tax.

This contention ignores the scheme of the Sales Tax Assessment Act which seems to be not significantly different from that considered by Dixon J. in Ellis & Clarke (supra) and by McTiernan J. in Taubmans (supra) . In both

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ATC 4888

cases the view was taken that a ``manufacturer'' was a person who carried on the business of manufacturing and who was required therefore to get a certificate of registration under the Act. Such a person who manufactured goods not for sale to somebody else but for his own use was required to disclose that fact in a return and was then liable to pay sales tax upon it.

It was never suggested in those cases, or as far as I can glean in any of the other cases to which my brother Thomas J. has referred, that a person carrying on a business which does not require him to get a certificate of registration under the Act who makes or manufactures something to assist him in the pursuit of his business activities becomes liable to pay sales tax, with respect to the notional ``wholesale value'' of that thing.

In my view such a contention is not supported by the decision in Hornibrook's case or by anything said in that case.

In my view the learned trial Judge was correct in construing the term manufacturer to mean ``a person who carries on the business of manufacturing goods for sale''. It is only such a person who is required to obtain a certificate of registration under the Act.

Section 11(1) of the Act requires ``a person who is a manufacturer or a wholesale merchant'' to be registered under the Act. Section 11(2) requires such a person to apply to the Commissioner for registration. Section 11(3) provides that an application made pursuant to subsec. (2) shall:

``(a) be in a form provided by the Commissioner;

(b) unless the Commissioner otherwise directs, be lodged with a Deputy Commissioner exercising powers or performing functions in relation to -

• (i) that part of a State in which the person has his principal place of business as a manufacturer or wholesale merchant; and
• (ii) each other State (if any) in which the person has a place of business as a manufacturer or wholesale merchant;

(c)...''

Section 11(3A) provides:

``Subject to subsections (3B) and (3C) where the Commissioner is satisfied that a person who has made an application in accordance with subsections (2) and (3) is a manufacturer or a wholesale merchant, the Commissioner shall register the person.''

The form of application for registration as manufacturer or wholesale merchant is Form A in the Second Schedule to the Sales Tax Regulations . It may be observed that an applicant for registration is required to state inter alia:

• ...
• 2. The name under which business as manufacturer or wholesale merchant is or will be carried on.
• (3). Full address of place where that business is or will be carried on.
• ...
• 7. Date or proposed date of commencement of business as manufacturer or wholesale merchant.

Section 13 of the Act provides inter alia:

``13. Any person carrying on business as a manufacturer or as a wholesale merchant who is required by or under section 11 to become registered and who refuses or fails, within or at the time specified by or under that section to become registered... [is] guilty of an offence...''

Reference to these sections and the form of application for registration when considered in the light of the scheme of sales tax legislation considered by Dixon J. in Ellis & Clarke and Windeyer J. in Taubmans indicates to my mind that a ``manufacturer'' referred to in sec. 17(2) and 19 of the Act is a person who carries on business as manufacturer and does not refer to any person who in the course of carrying on a different kind of business makes or manufactures something for his own use to enable that non-manufacturing to be carried on.

In the present case the respondent clearly is not in the business either wholly or partly of manufacturing any goods for sale. It is in the business of conducting an approved gambling operation.

In my view the learned trial Judge was correct in making the declaration which he did.

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ATC 4889

I agree that the appeal ought be dismissed and that the appellant ought be ordered to pay the respondent's costs of and incidental to the appeal to be taxed.