CASE 48/96

Members:
J Block SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 6 August 1996

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J Block (Senior Member)

The Applicant sought the review of a decision by the Respondent dated 13 April 1995 disallowing the Applicant's claim for a refund of sales tax totalling $9,321.40; the notice of objection by the Applicant dated 15 June 1995 contends (inter alia) that certain printed material is exempt from sales tax under Item 51(1) of the First Schedule to the Sales Tax (Exemptions & Classifications) Act of 1935 (the ``Act''). The Applicant is a printing company; as such it printed circulars and other material for an association of clubs, and which is referred to as the ``Association''.

2. The Applicant was represented by Mr D. K. L. Raphael of Counsel and the Respondent was represented by Mr S. J. Gageler of Counsel. The Tribunal accepted into evidence the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 and also certain exhibits, and being in particular:-

Exhibit A1 which consists of certain sales tax rulings (and other material) and including a Draft for comment only (the ``Draft Ruling'') issued as a draft for industry and professional comment.

Exhibit A2 which is the issue dated 22 July 1996 of ``Australian Tax Cases''.

Exhibit A3, and being circulars issued by the Association to its member clubs during the period (``relevant period'') which commenced on 1 August 1991 and ended on 31 December 1992.

Counsel for the Respondent furnished the Tribunal with an index referable to Exhibit A3, which was tendered by way of assistance and not as an exhibit.

Both Counsel furnished helpful written submissions.

3. Oral evidence was given by an accountant and auditor who will be referred to as ``Mr A'' on behalf of the Applicant. Mr A is a partner in the accounting firm (the ``Firm'') which acts for the Applicant; the Firm commenced acting for the Applicant at the time of lodgment of the Applicant's refund application, and thus not in respect of the relevant period. Although Mr A's evidence was by no means the best or direct evidence, consisting as it did solely of hearsay evidence, and having been based entirely on enquiries made by Mr A (or a manager in the Firm) of the financial controller of the Association, it was not in any way contentious and was accepted by the Tribunal; that evidence by Mr A revealed:

• (a) the Association issues plastic binders to its member clubs;
• (b) circulars are sent to member clubs; they are coloured either pink or blue, although Mr A was not able to inform the Tribunal as to the distinction between these colours;
• (c) the circulars were intended for insertion in the plastic binders; circulars were accompanied (according to Mr A's understanding) on occasion by an index of circulars and that index might on other occasions be replaced by an updating index.
• (d) the circulars were invariably sent by post in stamped envelopes;

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• (e) each circular consisted of a single sheet or two or more sheets; the member clubs would complete the process necessary to ensure the placement of the circulars in the folders, and in other words the member clubs would punch the necessary holes for this purpose;
• (f) Member clubs, the number of which is in excess of 200, pay a fee to the Association; the receipt by member clubs of the circulars is one of the benefits afforded by membership of the Association.

4. Item 51(1) of the First Schedule to the Act exempts from sales tax:

``Books, pamphlets, leaflets, periodicals, magazines and printed music, but not including (unless covered by any other item or sub-item in this Schedule)-

• (a) books of account; books of receipts, cheques, deposit slips, bank withdrawal forms, tickets, dockets, labels or order forms; books of blotting paper, books of blank sheets, or of sheets ruled or printed, for writing notes, letters, exercises, accounts or for record purposes, or for sketching, drawing, colouring or painting (not being children's books containing printed illustrations for copying or colouring or for copying and colouring); albums, books of samples, menus or calendars; booklets of printed matter conveying greetings or sympathy; diaries; other stationery in book form;
• (b) programmes, schedules, syllabuses, guides or souvenirs of entertainments, amusements, exhibitions, competitions or sporting events;
• (ba) books covered by sub-item (3) of item 3 in the Third Schedule;
• (c) catalogues or price-lists;
• (d) memoranda of association, articles of association, balance-sheets, statements or accounts or prospectuses of trading or other concerns carried on for the profit of individuals or associated reports;
• (e) advertising matter; or
• (f) books, pamphlets, leaflets, periodicals, magazines or printed music published or to be published for the purpose or as a means of advertising the business or the products of the publisher or of the person or persons for whom they are or are to be published.''

5. In its statement of Fact, Issues and Contentions (received by the Tribunal on 17 June 1996), the Applicant contended that the printed material sold by it to the Association (samples of which are contained at T3 of the T Documents) are pamphlets, leaflets, or periodicals within Item 51(1) of the First Schedule to the Act. The T Documents however make it clear that the Applicant bases its case on the proposition that the circulars must be regarded either as leaflets or as pamphlets. It may be noted in this context that:

• (a) the letter written on behalf of the Applicant to the Respondent on 30 November 1994 (T7) sets out that the claim for exemption is founded under Item 100(1) of Schedule 1 to the Sales Tax (Exemptions & Classifications) Act of 1992 (``the later Act''). It is clear, however, that the relevant timing is such that the claim (which is referable to the relevant period) must relate to the Act and not the later Act. However, Item 51(1) contained in Schedule 1 to the Act is in the same terms as Item 100(1) in Schedule 1 to the later Act, and it is clear that nothing turns on the fact that the later Act now applies in substitution for the Act. Furthermore, and because both Items are in the same terms, rulings are relevant to both Item 51(1) and to Item 100(1).
• (b) Mr Raphael correctly (in the view of the Tribunal) conceded that the circulars are not periodicals, and so that it is necessary only to consider whether they are pamphlets or circulars.

6. Both Counsel agreed, and the Tribunal accepts, that the ``essential character'' of the printed material will be fundamental. See in this regard
John Fairfax & Sons Ltd v DFC of T; Mirror Newspapers Ltd v FC of T 88 ATC 5033 at 5036; (1988) 15 NSW LR 620 at 624;
FC of T v Thomson Australian Holdings Pty Limited & Ors 89 ATC 4696 at 4698, 4701; (1989) 25 FCR 481 at 482, 486;
ACP Publishing Pty Limited v FC of T 93 ATC 4773; see in particular in this context page 194 of the decision by Hill J in the ACP case, which referred in turn to the decision in
DFC of T v Rotary Offset Press 72 ATC 4212. The ``essential character'' tests requires a determination of the objective character of the

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publication; that character will not depend upon the subjective aim of the publisher.

7. The Tribunal accepts that, whether any of the circulars are pamphlets or leaflets is (as noted in clause 4 of the Respondent's Outline of Submissions):

• (a) entirely a question of fact;
• (b) largely a matter of impression;
• (c) to be determined upon inspection of the document and by reference to its ``essential character''; and
• (d) to be guided by popular usage and common knowledge.

8. 

• (a) According to The Macquarie Dictionary, a ``leaflet'' is ``a small flat or folded sheet of printed matter, as for distribution'' and a ``pamphlet'' is ``a short treatise or essay, generally controversial, on some subject of temporary interest'' or ``a complete publication generally less than 80 pages, stitched or stapled and usually enclosed in paper covers'';
• (b) According to The Shorter Oxford English Dictionary, a ``leaflet'' is ``a small- sized leaf of paper or a sheet of paper folded into leaves but not stitched and containing printed matter, chiefly for gratuitous distribution'' and a ``pamphlet'' is ``a small treatise occupying fewer pages than a book, composed and issued as a separate work; always unbound, with or without paper covers'' or ``more specifically, a treatise of the size and form above described on some subject of current or topical interest'';
• (c) Jowitt's Dictionary of English Law defines a ``pamphlet'' as a ``small book, usually printed in the octavo form, and stitched''. This Dictionary does not contain a definition of ``leaflet'';
• (d) Words and Phrases Legally Defined (London; Butterworths 1989) states that ``leaflets'' includes ``any written information (Medicines Act 1968, section 132(1))''. There is no definition of ``pamphlet'' in this publication.

9. Exhibit A1 consists (inter alia) of rulings by the Respondent and including in this context the Draft Ruling. In this context:

(a) The latest ruling is ST (NS) 3001, the valid date in respect of which is 5 April 1990; it ends with the following paragraph immediately following clause 6.1(4):

``All private rulings previously issued in relation to the printing industry are amended to the extent that they are inconsistent with this Ruling.''

(b) The CCH Australian Sales Tax Guide notes that ST 2257, which was effective as from 24 June 1986, was superseded by ST (NS) 3001. However ST (NS) 3001 does not consider the position of circulars, whereas clause 3 of ST 2557 does, and in the following terms:

``Consideration has recently been given to whether circular letters or circular notices are exempt under sub-item 51(1), i.e. whether or not they are leaflets. Circular letters and circular notices are generally printed matter addressed to particular persons. They are not usually disseminated to the public at large. Examples of circular letters are letters to shareholders from a company and letters addressed to individual members of the public seeking support for a particular purpose or advertising the services of a particular company or organisation. Circular notices are advices to members of meetings, advices to employees of company events and advices to individual members of the public notifying a coming event.''

(c) Although the Draft Ruling has not been finalised, clauses 2.11 to 2.15 (inclusive) appear to set out, in more detail than other rulings, the Respondent's thinking and views as to the manner in which the relevant circulars are to be considered; accordingly they are set out in full in these Reasons as follows:

`` General characteristics of pamphlets and leaflets

2.11 Pamphlets and leaflets have the following general characteristics:

• • they contain information aimed at general distribution. A district or section of the public would qualify as general distribution, however, a select finite group, such as members of a club, would not;
• • they are complete in themselves, that is, the information contained in them stands alone; and

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• • they are made of paper (ie., 205 grams, or less, per square metre (gsm). The agreed definition provided by the paper industry is that a product weighing more than 205 gsm is cardboard).

Pamphlets

2.12 A pamphlet is a complete publication generally less than 80 pages stitched or stapled and usually enclosed in paper covers. A pamphlet can also be described as a small book of a few sheets, stitched or stapled but not bound, usually on a subject of current interest.

2.13 Other terms are sometimes used in place of pamphlet. These will also meet the guidelines for exemption under subitem 100(1). They are defined by the Macquarie Dictionary as follows:

Brochure - a booklet, or piece of folded paper, containing printed advertising or information; and

Booklet - a little book, especially one with paper covers.

Leaflets

2.14 A leaflet is a small flat or folded sheet of printed matter for distribution. Leaflets will normally be complete and understandable in themselves and will be for general distribution.

2.15 Other terms sometimes used in place of leaflets are defined by the Macquarie Dictionary as follows:

Flier (flyer) - a small leaflet;

Handout - a prepared statement issued free of charge, especially to the press, to members of an institution, to the audience at a lecture or performance;

Handbill - a small printed bill or announcement, usually for distribution by hand; and

Dodger - a small handbill.''

(d) The T Documents contained references (see T11 and T16) to certain older case- specific rulings. The Tribunal does not think it necessary to deal in any detail with the old rulings; apart from the fact that Ruling ST (NS) 3001 makes it clear that all rulings relating to Item 51(1) have been amended, it is incumbent upon the Tribunal to consider whether, under the Act, the circulars are, in respect of the relevant period (and not any earlier period) within the concepts of either a ``pamphlet'' or ``leaflet''.

10. In Case 57/95,
95 ATC 464, Senior Member B.H. Pascoe of this Tribunal was called upon to decide whether certain loose sheets were exempt under Item 100(1) of the later Act, which, as set out previously, corresponds with Item 51(1) of the Act. In that case the taxpayer was a stamp collector who had imported certain loose sheets, slightly larger than A4 size. Printed on each sheet was the name of a country, a year and facsimiles of the various stamps of that country. The sheets could be used for attaching an actual stamp over the facsimile or simply for reference purposes. The left hand margin of each sheet had holes punched some 19mm apart down the length of the page, to facilitate storage in a binder if required. In paragraph 8 of his decision, Senior Member Pascoe held that the loose sheets were leaflets, in the following terms:

``It is clear that the relevant sheets are not books or magazines and, although issued at intervals are not `periodicals'. The New Shorter Oxford Dictionary, 1993 Edition, defines pamphlet as `a group of several printed or written pages fewer than would make a book, fastened together without a hard cover and issued as a single or periodical work'. Leaflet is defined as `a small sheet of paper or a sheet folded into two or more leaves but not stitched containing printed matter (often advertisements) usually distributed free of charge'. In my view each individual sheet is a leaflet. Each consists of a single sheet of paper containing printed matter. The fact that it is also punched with a row of holes on one side to facilitate storage in a binder if required does not change its character sufficiently to remove it from being a leaflet.''

As to whether the loose sheets in question were available to the public is not clear, although it seems likely that they were. Although Counsel for the Respondent submitted that the decision in Case 57/95 was not correct, it is not necessary for the Tribunal to express a view since each case must be decided in accordance with its own facts.

11. In
EMI Australia Pty Limited v FC of T 94 ATC 5008, Hill J was called upon to decide whether sales tax was payable on certain

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booklets inserted into plastic containers housing compact discs. At pages 5011 and 5012, Hill J stated:

``... More substantial still are the booklets for the discs `Maria Callas Rarities' and `US' by Peter Gabriel. The booklet for the Peter Gabriel disc is stapled and contains 24 pages with photographs of paintings forming a number of pages, the complete words of the songs and technical information. The Maria Callas booklet contains 36 pages including translations in English, French and German of the songs recorded on the disc.''

and at page 5017 Hill J stated:

``... The Callas insert is a good example. It has an entity of its own greater than its function as a mere label for the container in which the compact disks are housed. Its function is informative. It can properly be characterised as a booklet or leaflet which also acts to provide a cover for the plastic container rather than as the identification label for the container, albeit containing information.''

The comment by Hill J at page 5017 would appear to be indicative of a view that the terms ``booklet'' and ``leaflet'' are synonymous and that a leaflet can thus consist of more pages than one. Both Counsel agreed with the view of the Tribunal that that statement was obiter; the Tribunal takes the view that these terms are not synonymous.

12. However, and as noted in paragraph 7 of the Respondent's Outline of Submissions, it is inappropriate to subject the words to intense etymological analysis. The application of dictionary definitions must in all circumstances be guided by popular usage and common knowledge. Counsel for the Applicant argued that the Act is a ``businessman's'' Act and that a common sense approach is appropriate.

13. As regards the term ``pamphlet'':

• (a) A pamphlet might, at least in the days of Swift, have been taken to refer to a treatise or essay of a literary nature, in those times often polemical, on occasion resorting to sarcasm or irony, and containing argument for or against any given proposition. Such a pamphlet might or might not have had literary merit. In modern parlance, the concept of a pamphlet might conceivably be wider, such that it is possible that it need not be polemic or perhaps even literary; it would however of its very nature be a document which is contained in itself, and thus of a ``one-off'' nature; the term ``pamphlet'' is not apposite, in the view of the Tribunal, to describe a series of circulars issued from time to time, containing information, or seeking information, as was the case with circulars requesting the completion of attached questionnaires.
• (b) Even more salient in my view is the fact that a pamphlet would ordinarily be available publicly whether or not on payment of a fee; put in other words the very essence of a pamphlet is that it is available to the public at large and that availability is not limited; the position will be different where availability is limited, even though that limitation may not in practical terms be difficult to overcome.
• (c) The public availability of a pamphlet is in my view a crucial element; similarly the form and content of the circulars are such that to describe them as ``pamphlets'' would be inappropriate; the term ``pamphlet'' is in accordance with popular usage and common knowledge, thus not apt to describe the circulars which are the subject of this Decision.

14. 

• (a) The term ``leaflet'' is, in my view, correctly described in the dictionaries previously referred to as a single sheet; it is perhaps relevant that the very term is itself a diminutive. Moreover a leaflet is not, in my view, the same as a booklet; the latter term connotes something longer than the former term. The term ``leaflet'' could relate to a single sheet folded into a wider single sheet, as occurs with instruction sheets for certain electronic equipment, and nevertheless remains a single sheet. Accordingly two or more sheets stapled together would not on this view constitute a leaflet. It is relevant to note that paragraph 8 of the decision in Case 57/95 focussed on the fact that ``each individual sheet is a leaflet''.
• (b) As important though is that, in my view, a leaflet is something which in ordinary parlance is freely and publicly available. The term ``leaflet'' connotes an item sent through the post or deposited in a mailbox or handed out on the street; it will generally be free, and it will be public in the sense that it is made available to the public or a section

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  of it. Thus an advertising leaflet (and a leaflet will often be an advertisement) for a plumber in Rose Bay in the Eastern suburbs of Sydney might be deposited in the letterboxes of residents of that suburb or of a wider area, and perhaps including other Eastern suburbs of Sydney, but quite possibly not the whole of Sydney.
• (c) The circular letters considered in this matter are not (even where they consist only of one page) correctly characterised as leaflets. On the contrary they are despatched by post to member clubs whose membership subscriptions entitle them, amongst other things, to receive the circulars by way of information and to enable them to build up (if so desired) folders containing that information. The circulars are in reality circular letters even though they do not commence with a salutation. Nearly all of them end with a reference to the issuing officer, and are couched in terms which might reasonably be expected in a circular letter. Although some circular letters consist of one page only (and on occasions more than one circular letter was despatched on the same day) many are more than one page in length; relevant information was contained, on many occasions in annexures. The thrust of most of them is towards the giving of information to member clubs, although, as set out previously, some were in the nature of information-seeking exercises. When considered as to their essential character, the term ``leaflet'' is in my view, altogether inappropriate.

15. 

(a) Counsel for the Applicant referred the Tribunal to the statement of Barwick CJ in
Lee v Evans (1964) 112 CLR 276 at page 287:

``That those to whose hands such an invitation is intended to come, also stand in some special relationship to the invitor, will not prevent the invitation being an invitation to the public.''

Lee v Evans is of course a case on company law, and relates to the question (in respect of prospectuses) of what constitutes the ``public'' or a ``section of the public'', for the purposes of section 5 of a now superseded Companies Act. I do not accept that such company law cases are relevant for the purposes of this decision; they relate rather to whether an offer or invitation could be made to offerees or invitees otherwise than pursuant to a registered prospectus.

In this instance, the Tribunal is concerned with circular letters which are sent to member clubs, containing (as set out previously) matters of general information, sometimes enclosing questionnaires for completion and return, and generally designed to assist the member clubs. The context of the circular letters is usually informative and certainly non-controversial. The fact that the information is not confidential in the sense that it is so secret that any recipient (or for that matter the Association) would be likely to seek to protect its confidentiality is not relevant for this particular purpose; similarly the fact that a non-club person (and being a member of the public at large) might, if he made efforts to do so, be able to obtain one or more circulars does not detract from this view.

(b) It was argued (although not strenuously) that the opening words of Item 51(1) are of such wide import that any printed material not excluded by the succeeding paragraphs (a) to (f) inclusive will be exempt; I do not consider that any such construction is warranted or tenable.

(c) The fact that of all the items referred to in the opening words of Item 51(1), only ``periodicals'' is defined, does not in my view produce any interpretation helpful to the Applicant.

(d) The Applicant's argument to the effect that the doctrine of mutuality, (see
Brookton Co-operative Society Ltd v FC of T 81 ATC 4346), requires the Tribunal to treat all members of each club as equivalent to that club, so that each circular letter is in effect sent to all members of that club, and thus to the public or a section of the public, is ingenious, but not tenable. There was, in any event (even if this were relevant), no evidence that circular letters were either made available to members of club members of the Association, or that members of club members of the Association were interested in receiving the relevant material which is unlikely in the main to be of general interest. This argument was raised by way of afterthought and Counsel for the Respondent did not (correctly) consider that he needed to deal with it; it is rejected.

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(e) It was argued that because Exhibit A2 (the 22 July 1996 issue of Australian Tax Cases) is exempt, the circulars which are (it was argued) similar, should also be exempt. This argument too must fail; it may be that ``Australian Tax Cases'' is exempt as a periodical or for some other reason or it may be that Australian Tax Cases has been incorrectly exempted. It is unnecessary for the Tribunal to speculate on this aspect, since it is not relevant in relation to the circulars which are the subject of this matter, and as to which this decision is required.

16. Nor is it necessary or desirable for the Tribunal to speculate on the policy reasons why some (and perhaps most) items of printed material but not all are exempt from sales tax.

17. 

(a) The rulings previously referred are, of course, helpful, but they are not of course binding. I consider though that I should state that in my view paras 2.11 to 2.15 (inclusive) of the Draft Ruling contain the clearest and most helpful expositions of the Respondent's view of the issues involved. In particular, in this regard, I agree with the Respondent's view that pamphlets and leaflets are essentially aimed at general distribution, and that members of a club do not constitute general distribution. (See the first dot point in clause 2.11 of the Draft Ruling.)

(b) In general terms and having regard to the essential character of the circulars, I consider that they are neither pamphlets nor leaflets, and therefore do not qualify for exemption.

18. 

(a) Prior to the conclusion of this hearing I invited the parties, if either wished to do so, by not later than 2 August 1996, to make further submissions, but confined to any available material in respect of relevant explanatory memoranda referable to the statutes or to any relevant second reading speeches. On 2 August 1996 Mr A sent the Tribunal a fax (containing further material, but not so confined) in the following terms (edited only for purposes of anonymity):

``Mr Block

Re The Association

David Raphael requested me to fax the following to you.

JE, the employee who has dealt with circulars for last 14 years at the Association advises as follows:

• 1. The Association initially send out plastic cover with inserts if any;
• 2. The Association staple but do not punch;
• 3. Members punch and file;
• 4. The Association no longer send out updated index;
• 5. There are currently 1,400 Member Clubs;
• 6. There are currently 151 Associate Members who pay per annum for the circular service. The Associates can be anyone in the hospitality industry and include, consultants, other associations, breweries, suppliers etc;
• 7. 24 Councillors receive copies;
• 8. 18 accountants and/or auditors, solicitors and a judge purchase copies for an annual subscription;
• 9. Colours are blue for industrial, pink for admin, cream or old gold for training plus other colours as need arises; and
• 10. JE provided the attached list of non member recipients.''

(b) The fax by Mr A amplifies the evidence given by him at the hearing and does indeed include as an attachment a list of non- member recipients. The fax by Mr A does not seek to explain why this additional material was not given in evidence at the hearing.

(c) As to whether I should consider the additional material submitted (in most unorthodox and, in my view, undesirable fashion) by Mr A after the hearing given that it is not restricted to the statutes, is questionable. I agreed to accept additional submissions which might throw light on how the Act might be interpreted, but not additional evidence. I assume in this context that copies were sent to the Respondent, although this is by no means clear. In my view, nothing turns on the matter, since that additional evidence (also hearsay) does not affect the conclusion to which I have come. Although the number of recipient clubs appears to be larger than was thought, and

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although it appears that it is possible for certain specified non-members (referred to in 6, 7, and 8 of the fax) to receive (and except in the case of State Councillors on payment of a subscription amount) the circulars, and although the colour difference is explained, the circulars are nevertheless not available to the public at large, and apart from any other considerations, the element of general distribution remains absent. The additional material submitted by Mr A does not in my view take the matter any further.

19. In the circumstances the decision under review is affirmed.