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CHIEF EXECUTIVE OFFICER OF AUSTRALIAN CUSTOMS SERVICES v TASMANIAN ELECTRO METALLURGICAL COMPANY PTY LIMITED

Judges:
Merkel J

Court:
Federal Court

Judgment date: Judgment handed down 7 July 1997

Merkel J

Introduction

The Chief Executive Officer of Australian Customs Service (``ACS'') has appealed on questions of law to the Court, pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth), from a decision of the Administrative Appeals Tribunal (``the AAT''). The AAT's decision was given upon a review of two decisions of a delegate of the Collector of Customs for Tasmania to refuse certain rebates on diesel fuel claimed by Tasmania Electro Metallurgical Company Pty Limited (``Temco''). It was claimed that these rebates were payable under s 164(1) of the Customs Act 1901 (Cth) (``the CA'') and s 78A of the Excise Act 1901 (Cth) (``the EA'').

The claims for rebates relate to diesel fuel used by Temco in operations carried out at Bell Bay, Tasmania, which resulted in the production of ferrosilicon by a smelting process and the production of ferromanganese and silicomanganese by a sintering and smelting process.

The AAT set aside the decisions under review and remitted the matter for reconsideration in accordance with directions that:

  • • the smelting operations, whereby ferrosilicon was produced, did not constitute ``mining operations'' within the meaning of s 164(7) of the CA; and
  • • the sintering and smelting operations, whereby ferromanganese and silicomanganese were produced, constitute ``mining operations'' within the meaning of s 164(7) of the CA.

ACS has appealed from the decision of the AAT in so far as it had the effect of conferring eligibility for the diesel fuel rebate on Temco's operations for the production of ferromanganese and silicomanganese at Bell Bay. There is no appeal in relation to the AAT's decision in so far as it had the effect of disallowing the rebate in respect of the production of ferrosilicon.

The rebate is payable, under s 164(1) of the CA and s 78A of the EA, to a person who purchases diesel fuel for use by that person in ``mining operations''. Section 164(7), in so far as is presently relevant, provides that in s 164:

```minerals' means minerals in any form, whether solid, liquid or gaseous and whether organic or inorganic, except:

  • (a) sand, sandstone, soil, slate, clay (other than bentonite or kaolin), basalt, granite, gravel or water; or
  • (b) limestone (other than agricultural use limestone).

`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...''

A number of activities are specified in sub- paragraphs (c) to (w) of the definition as being included in the definition of ``mining operations''. In particular sub-paragraph (c) specifically makes provisions for mining operations to include dressing or beneficiation which might occur ``at a place other than the mining site''.

The AAT determined that:

  • • ore bearing manganese was mined at Groote Eylandt in the Northern Territory by Groote Eylandt Mining Company Pty Ltd (``Gemco'');
  • • the ore was transported to Bell Bay, Tasmania, where it was beneficiated by

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    Temco as an integral part of operations for the recovery of the manganese;
  • • manganese was a mineral as defined in s 164(7) of the CA; and
  • • Temco was entitled to the diesel fuel rebate for the diesel fuel purchased for use by it in the beneficiation of the ore bearing manganese at its plant at Bell Bay.

Gemco and Temco are subsidiaries of the Broken Hill Proprietary Company Limited.

The principal questions of law said by ACS to arise on the appeal are:

  • (a) whether the AAT misconstrued the statutory definition of ``mining operations''; and
  • (b) whether, in any event, it was open to the AAT to conclude that the sintering and smelting operations whereby ferromanganese and silicomanganese are produced constitute ``mining operations'' as defined in s 164(7).

The questions of law relate to the meaning given by the AAT to paragraph (b) of the definition of ``mining operations'' and, in particular, to the words ``minerals'', ``beneficiation'' and ``recovery''.

In the hearing before the AAT there was little dispute between the parties as to the actual activities which were alleged to constitute the relevant operations. Rather, the dispute related to the proper characterisation to be given to those activities in the context of the statutory definition of ``mining operations''. Notwithstanding what may be thought to be a confined area of dispute, approximately 1,000 pages of the Appeal Book relate to submissions and to evidence adduced in the hearing in the AAT.

The contentions of the parties

In substance ACS's contentions on the factual issues were that:

  • • ores containing manganese oxide were mined at Groote Eylandt by Gemco;
  • • the object of the mining operations at Groote Eylandt was the production of pyrolusite and cryptomelane;
  • • the ores as mined were beneficiated by Gemco at the mining site to produce pyrolusite and cryptomelane;
  • • pyrolusite and cryptomelane were vendible products which were sold by Gemco as such in their own right;
  • • only 25% of the pyrolusite and cryptomelane produced by Gemco was sold to Temco for sintering and smelting at Bell Bay;
  • • the sintering and smelting at Bell Bay was not an integral part of operations for the recovery of a naturally occurring or an ``as mined'' mineral but rather, was a manufacturing process involving chemical change, the introduction of iron to produce the alloy ferromanganese and the introduction of silicon to produce the alloy silicomanganese;
  • • the two alloys were produced for use in steel making at BHP's steelworks in Newcastle rather than for the recovery of manganese; and
  • • although Gemco might be entitled to the statutory rebate for the diesel fuel used in the beneficiation processes at Groote Eylandt, no equivalent entitlement existed in respect of the diesel fuel used by Temco in the ferro alloy manufacturing processes at Bell Bay.

ACS's case was that any relevant operations for the purpose of s 164(7) were those involving the recovery of pyrolusite and cryptomelane at Groote Eylandt rather than the further manufacturing or processing of those products at Bell Bay or elsewhere. In essence ACS contended that the operation at Bell Bay involved the manufacture of ferro alloys rather than mining. Indeed ACS's case was that pure manganese, which is used in chemical, battery and aluminium production but not in steel making, is never recovered by Gemco or Temco.

In substance, Temco's contentions on the factual issues were that:

  • • the mining of pyrolusite and cryptomelane at Groote Eylandt was mining for ore bearing manganese;
  • • the object of the mining operations at Groote Eylandt and at Bell Bay was the recovery of manganese;
  • • manganese was a mineral as defined by s 164(7);
  • • the sintering and smelting processes at Bell Bay involved ``dressing or beneficiation'' of manganese or an ore bearing manganese;
  • • the recovery of manganese commenced at Groote Eylandt but was not completed until

    ATC 4568

    manganese was recovered in the beneficiation of the pyrolusite and cryptomelane at Bell Bay;
  • • the operations at Bell Bay which produced the beneficiated products, being ferromanganese and silicomanganese, were an integral part of the operations for the recovery of manganese to enable its industrial use in steel making;
  • • the recovery of manganese for introduction into steel was achieved by beneficiation which reduced the oxygen content but increased the manganese concentration, from 48.6% to 76% in the ferromanganese and from 28% (in the feed slag) and 54% (in the sinter) to 65% in the silicomanganese; and
  • • it was irrelevant that, in the present case, pure manganese was not recovered.

It is obvious that the competing contentions of the parties primarily involve the resolution of questions of fact, rather than of law.

The decision of the AAT

The AAT made the following findings in respect of the operations of Temco at Bell Bay:

``The facility produces manganese sinter for use as a raw material in the production of ferromanganese and silicomanganese. Its output also comprises ferromanganese, silicomanganese and ferrosilicon, although the production of ferrosilicon ceased in November 1992.

...

The manganese-bearing raw materials are brought into the Bell Bay plant from Groote Eylandt, and are pyrolusite (manganese oxide, MnO2) and cryptomelane (potassium manganese oxide, KMn8O16).

14. The sintering process

This process agglomerates fine particle - size manganese ore (exh.A19) brought from Groote Eylandt as such, fines produced by screening the crushed ore at Bell Bay, and fines arising from crushing the manganese alloys produced at Bell Bay. This mixture of fines, together with coke, which is used as a reducing agent (reductant), is passed under a hot flame. The manganese oxide, MnO2, is reduced to Mn3O4 in the form of a porous, lumpy product, with the production of carbon dioxide gas (CO2) and dust. The gas is cleaned and discharged to atmosphere and the dust is recycled. The consequences of the sintering process are the agglomeration of MnO2 fines (a particle size unsuitable for feeding to a smelting furnace) into porous lumps of Mn3O4 and an increase in manganese content from 48.6% to 54%.

15. The smelting process

High carbon ferromanganese (H.C. FeMn) and silicomanganese (SiMn), together with ferrosilicon (FeSi) are produced by smelting in electric furnaces at Bell Bay. Insofar as H.C. FeMn and SiMn are concerned:

`These two alloys are used almost exclusively as the bulk manganese bearing raw materials used by the steel industry world wide. H.C. FeMn tends to be used by the traditional fully integrated steelworks while SiMn tends to have greater application in electric furnace steel production. SiMn is frequently used in the production of flat products (plate, sheet etc). Bulk ferroalloys are the most economic form of manganese addition to steelmaking because the price/Mn unit is low, the yield is high, the physical nature, dense lumps, is ideal for additions to steelmaking where penetration of the slag is critical, technology is mature and highly competitive and the process is suitable for mass production.'

(Exh.A3, Page 4)

(i) Ferromanganese

The principal raw feed is either metallurgical grade manganese lump ore or manganese sinter. This is smelted with iron ore obtained from Whyalla, S.A. and with limestone, coal and coke as fluxes and reductants. A slag is produced in the process. The purpose of the slag is to remove the contaminants in the raw materials. As the slag contains approximately 28% manganese it is stockpiled and subsequently used in the production of silicomanganese.

The use of lump ore (MnO2) as the feed raw material results in an improvement in manganese content from 48.6% to 76.0% in the produced ferromanganese, the remainder being composed mainly of iron (16%) and carbon (6% - 7%). The use of manganese sinter (Mn3O4) in the feed raw material

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results in an improvement in manganese content from 54% to 76%.

(ii) Silicomanganese

The principal raw materials are ferromanganese slag, manganese sinter and quartzite. These are smelted with iron ore, together with dolomite, coal and coke as fluxes and reductants. A slag is produced as a waste product and is disposed of for landfill. The product, silicomanganese, contains 65% manganese compared with 28% in the feed slag and 54% in the manganese sinter. The remainder is composed of silicon (16%) and iron (15%).''

(at 7, 8, 9)

The AAT then considered the conflicting expert evidence as to whether manganese was a mineral and concluded:

``It is clear from all of this that there are different schools of thought as to what substances may properly be regarded as minerals. Given that the legislation must be interpreted beneficially on the basis of the informed general usage of words rather than strict scientific interpretations, we hold that manganese is a mineral within the definition of `minerals' within s.164(7) of the Customs Act. That definition refers to `minerals in any form'. It is not confined to naturally occurring or as-mined minerals. When the manganese arrives at Bell Bay, it is in the form of an element chemically bonded to other elements in the compounds manganese oxide (pyrolusite) and potassium manganese oxide (cryptomelane). When the manganese leaves Bell Bay, it is present as an element in different chemical compounds in the ferromanganese and silicomanganese that are produced there.''

(at 15-16)

The AAT then turned to consider the words ``beneficiation'' and ``dressing''.

``The words `beneficiation' and `dressing' are not defined in the Customs Act or the Excise Act. They are technical terms applicable to a range of processes in the mining and metallurgical industries. The word `beneficiation' is not a term in ordinary English usage, nor is the word `dressing' in its mining and metallurgical sense. Accordingly the meanings of these words have to be determined as questions of fact...''

(at 16)

After considering the conflicting expert evidence as to whether the processes at Bell Bay constituted the ``dressing'' or ``beneficiation'' of minerals or ores bearing minerals the AAT said:

``On the basis of the body of expert evidence before us, we believe that there is little support for the view that processes involving chemical changes cannot properly be characterised as the beneficiation of minerals. We consider that the term `beneficiation' in the definition of `mining operations' should not be interpreted as referring only to physical changes, and not to chemical changes, for such a construction would be contrary to the predominant use of the word in the mining and metallurgical industries, and would be contrary to the principle that the legislation should be interpreted beneficially and not narrowly.

The terms `dressing' and `beneficiation' are not alternative terms for the same process. While `dressing' can be and is used to describe a physical process that increases the concentration of the mineral and therefore the valuable element which is sought (in the present case manganese or silicon) beneficiation can be and is used to describe the physical and chemical processes which increase the concentration of the valuable element in the mineral mined, or in the derivative of the mineral up to but excluding the step in which the valuable element is isolated from the mineral or derivative in which it is bound.

Beneficiation is thus distinct from the process of manufacturing, or isolating, the valuable element contained in the mineral or its derivative.

Insofar as the mineral is concerned all steps in which the concentration of the valuable element is increased by physical or chemical processes, even though the identity of the chemical compound in which the valuable element is chemically bound changes, can be considered to be beneficiation.

Beneficiation of Manganese - The Purpose of the Processes

The Tribunal finds that the predominant reason for mining manganese ore at Groote Eylandt is to provide a source of manganese, an essential ingredient in steel, in a suitable

ATC 4570

form for incorporation in the steel-making process. (at 26-27)

...

On the evidence before it the Tribunal finds that ferromanganese and silicomanganese are solely used for the purpose of introducing manganese into the steel. It is true that each of ferromanganese and silicomanganese has properties which are advantageous, to a slight degree, in the manufacturing of different types of steel. However steelmaking is so complicated that one could not reasonably expect any ingredient used in the manufacturing process not to cause side effects incidental to the purpose for which it is introduced. A steelmaker wishing to introduce manganese into its steel will no doubt prefer to introduce it in a form that has desirable side effects rather than undesirable side effects. In this case, the side effects are so insignificant that, as we have said, we are able to conclude that ferromanganese and silicomanganese are used for no other purpose than introducing manganese into the steel.

As we have said, s. 164(7) of the Custom Act provides:

`mining operations' means:

...

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

Thus beneficiation within the meaning of the above definition is, inter alia, a process or series of processes which is or are applied to a mineral as an integral part of operations for the recovery of that mineral.

The definition thus defines beneficiation to be a process or processes which can be applied to a mineral, per se, and not only to a mixture of substances one or more of which is a mineral.''

(at 30-31)

The AAT then discussed the authorities which considered the meaning of ``recovery of a mineral''. After considering the decisions of the Full Federal Court in
Collector of Customs v BHP Australia Coal Ltd (1994) 53 FCR 499 and
Abbott Point Bulk Coal Pty Ltd v Collector of Customs (1992) 35 FCR 371 and the New Shorter Oxford English Dictionary which defines ``recovery'', relevantly, as ``the extraction or retrieval of a usable substance from raw material or a reusable substance from industrial waste'', the Tribunal (at 30-31) applied the principles it had discussed to Temco's operations at Bell Bay. The AAT concluded:

``It is common ground that what goes on at Bell Bay in the case of manganese-bearing ores and minerals involves the recovery of manganese. (at 31)

...

In the circumstances under consideration there is a stepwise series of processes involving a progressive increase in the concentration of the valuable constituent, manganese. (at 33)

...

It is of crucial significance that, in the case of ferromanganese and silicomanganese, it is the manganese which is of value to the user of these materials. Mr Cavanough accepted the `continuum' of increasing concentration but appeared to require that the concentration be taken to the ultimate stage in which isolation of the metal occurs. In the Tribunal's view this is not required; indeed, the final steps would not constitute beneficiation.

However, the purpose of the concentration process must be to make available, as such, the constituent which is being increased in concentration - in the present case manganese. (at 34) (emphasis in original)

...

The Tribunal finds, on the evidence before it, that the processes whereby ferromanganese and silicomanganese are produced, including sintering and smelting, constitute beneficiation as an integral part of the recovery of the mineral concerned, namely manganese. They therefore constitute `mining operations' within the meaning of s. 164(7) of the Customs Act. (at 35)

...

The sintering operations carried on by the applicant at Bell Bay in Tasmania, and the smelting operations carried on by it there whereby ferromanganese and silicomanganese were and are produced, all

ATC 4571

constitute, and at all material times constituted, mining operations within the meaning of s. 164(7) of the Customs Act 1901.''

(at 38)

The detailed reasons of the AAT demonstrate that its decision was based primarily on its determination of questions of fact rather than questions of law.

Questions of law

Until recently a number of decisions of the Court have placed reliance on five general propositions stated by the Full Federal Court in
Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287:

``1. The question whether a word or phrase in a statute is to be given its ordinary meaning or some technical or other meaning is a question of laws;

2. The ordinary meaning of a word or its non-legal technical meaning is a question of facts;

3. The meaning of a technical legal term is a question of law;

4. The effect or construction of a term whose meaning or interpretation is established is a question of laws;

5. The question whether facts fully found fall within the provision of a statutory enactment properly construed is generally a question of laws...''

(authorities cited are omitted).

The Full Court qualified the fifth proposition by saying, at 288, that when a statute uses words according to their ordinary meaning and it is reasonably open to hold that the facts of the case fall within those words, the question as to whether they do or do not is one of fact. The qualification is significant in the present case as the AAT concluded that the statute did not use any relevant words according to any special meaning.

Recently, the High Court in
Collector of Customs v Agfa-Gevaert Limited 96 ATC 5240 at 5244; (1996) 186 CLR 389 at 396 said that whilst such general expositions of the law are helpful, in many circumstances they lose a degree of their utility when ``the phrase or term in issue is complex or the inquiry that the primary decision-maker embarked upon is not clear''. At ATC 5244-5245; CLR 396-397 the Court queried the artificiality of the distinction between the second and fourth propositions saying:

``The meaning attributed to individual words in a phrase ultimately dictates the effect or construction that one gives to the phrase when taken as a whole and the approach that one adopts in determining the meaning of the individual words of that phrase is bound up in the syntactical construction of the phrase in question....

...

If the notions of meaning and construction are interdependent, as we think they are, then it is difficult to see how meaning is a question of fact while construction is a question of law without insisting on some qualification concerning construction that is currently absent from the law.''

(footnotes omitted)

The High Court did not have to resolve this issue as it was sufficient for it to conclude that:

``... the determination of whether an `Act uses [an] expression... in any other sense than that which they have in ordinary speech' is always a question of law.''

(at ATC 5245; CLR 397)

After observing at ATC 5246; CLR 398-399 that:

``... the `presumption' in favour of trade meaning in revenue statutes does not deny the possibility that words used in a revenue statute directed to commerce are to be understood in their ordinary meaning.''

(footnotes omitted)

the High Court said at ATC 5247; CLR 401:

``Trade meaning and ordinary meaning do not necessarily stand at opposite extremities of the interpretative register. Professor Glanville Williams has described the distinction between primary (ordinary) meaning and secondary (trade) meaning as the distinction between, on the one hand, the `most obvious or central meaning' of words, and on the other hand, `a meaning that can be coaxed out of the words by argument'. Similarly, Professor Driedger describes this distinction as being that between ```the first blush'' grammatical and ordinary sense... [ and] the ``less'' grammatical and ``less'' ordinary meaning'.''

(footnotes omitted)

The last observation is of particular significance in the present case. The AAT had

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concluded that the words ``minerals'', ``beneficiation'' and ``recovery'', as used in s 164, had no meaning which was universally understood in the relevant trade and had been so understood when the law in question was enacted: see
Agfa-Gevaert v Collector of Customs (1994) 124 ALR 645 at 649 per Gummow J. Accordingly, the AAT drew on evidence as to the use of particular words in the mining and metallurgical industries to assist it in determining the ordinary meaning to be given to those words. In these circumstances, contrary to the submissions of ACS, the AAT did not err in law in having regard to the use and meaning attributed to the words in the relevant trade or industry in ascertaining the ordinary meaning of the words in the context in which they were used in s 164.

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); and
  • • 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, paragraph (b) of the definition of ``mining operations'' in s 164(7).

In the circumstances to which I have referred, the task of ACS in demonstrating error on a question of law is formidable. That is particularly so as the approach of the AAT was also consistent with decisions of the Court in relation to the entitlement to the rebate for diesel fuel used in ``mining operations''.

Mining Operations

Although the definition of ``mining operations'' has been amended recently, several principles can be distilled from the cases:

  • 1. The relevant statutory provisions reflect a legislative policy of encouragement of mining operations and should not be given a narrow application: see
    Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271 at 275.
  • 2. Whether an activity falls within the definition of ``mining operations'', as defined in s 164(7) of the CA, is a question of fact: see Abbott Point Bulk Coal Pty Ltd v Collector of Customs (supra) at 378 and Collector of Customs v BHP Australia Coal Ltd (supra) at 507.
  • 3. The diesel rebate is payable to a person who purchases fuel for use by that person in mining operations as defined notwithstanding that the person is not a miner and that the relevant mining operation takes place at a location away from the mining site:
    Australian National Railways Commission v Collector of Customs, South Australia (1985) 8 FCR 264 at 268-269 and 275 and
    Chief Executive Officer of Customs v Dyno Wesfarmers Ltd (Full Federal Court, 23 May 1997, unreported).

A difficult issue commonly arising in cases concerning s 164(7) is the determination of the point at which the process of beneficiation of a mineral or mineral bearing ore, as an integral part of operations for their recovery, is complete. In Abbott Point at 374 Ryan and Cooper JJ expressed the view that although ``beneficiation'' is not a term in ordinary English usage it was a technical term applicable to a range of processes in the mining and metallurgical industries and accordingly its meaning is to be determined as a question of fact. Their Honours accepted that a tribunal finding that beneficiation denotes processing of minerals or ore bearing minerals to improve their physical and chemical properties, if supported by evidence, could not be disturbed on an appeal restricted to questions of law. See also French J at 390. The conclusion that beneficiation might involve chemical change is also supported by the decision of the AAT in
Re Western Mining Corporation Ltd and the Collector of Customs, Western Australia (30 March 1984, unreported at 11, 24-26 and 31) and
FC of T v ICI Australia Limited 72 ATC 4213 at 4219; (1972) 127 CLR 529 at 567 per Barwick CJ.

Closely linked to the process of beneficiation is the question of when, in relation to a particular mineral, the recovery process is complete. In each case the AAT, as the tribunal

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of fact, must identify the mineral or the ore bearing mineral sought to be recovered and determine when its recovery is complete.

In endeavouring to resolve this difficulty Ryan and Cooper JJ said at 378 in Abbott Point:

``Whether an activity falls within the definition of `mining operations' as defined in s 164(7) of the Customs Act 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. Although care needs to be taken in referring to decisions on other legislative enactments to determine the meaning of `mining operations' in the Customs Act, the authorities do give some understanding as to the common or ordinary acceptation of that term.''

and at 379:

``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 product 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.''

However, at 389 French J said:

``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.''

A subsequent attempt by the Collector of Customs to elevate the observations of Ryan and Cooper JJ in Abbott Point to a general proposition as to when recovery should be regarded as finalised was rejected by the Full Federal Court in Collector of Customs v BHP Australia Coal Ltd (supra) at 509. At 510 the Court said:

``If, as we are satisfied, Abbott Point is not to be taken as authority for a proposition that `recovery' of coal must inevitably be complete when it reaches the stockpile at the mine site, then the way is open for the Tribunal to have made its finding without the commission of legal error.

We revert, then, to BHP's submission that there were two possible paths by which the Tribunal could have reached its finding that the `pushing-in' operation was an integral part of the `recovery' process. We find it necessary to refer only to the first of the suggested lines of argument. The argument proceeds, validly in our view, on the basis that moisture or water in excessive quantities is relevantly an impurity to be eliminated in the mining of coal as part of the `recovery' process. In the present case, the evidence establishes clearly that moisture is present in the raw coal as mined and that considerable water is introduced in the washing procedures both of the fine and also the coarse coal fragments in the second stage of the `recovery' procedure. When the coal emanating from each aspect of the washing process is placed upon the conveyor belt to take it to the stockpile, it contains more water than is regarded as desirable for the purpose of the end product. The `pushing-in' operation helps in the reduction of the excess water. It is, therefore, part of the `recovery' process.''

This passage is significant in relation to the present case as it demonstrates that removal of impurities and the consequential enhancement

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of a mineral concentration can form part of the ``recovery'' process.

Another Full Federal Court considered this issue in
Regional Director of Customs (WA) v Dampier Salt (Operations) Pty Ltd (1996) 23 AAR 252. The Court said at 258:

``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.''

and at 260:

``[The] 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 the 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 .''

(Emphasis added)

After considering a number of authorities including Abbott Point and BHP Australia Coal the Court said at 263:

``From [the] 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.''

(Emphasis added)

An important strand running through the decisions is the requirement in each case to determine the product which is to be produced as the object of the particular mining operations (Dampier Salt at 263) or, put another way, the intended outcome of the mining operations (Dampier Salt at 260).

The AAT's approach to `mining operations'

In the present case the AAT was clearly of the view that the intended outcome or object of the mining operations at Groote Eylandt and Bell Bay was the production of ferromanganese and silicomanganese to enable the recovery of the mineral manganese for the purpose of introducing it into steel. In a narrower sense it can be accepted, as is contended by ACS, that the object of Gemco's operations at Groote Eylandt is the recovery of pyrolusite and cryptomelane. However, the AAT found that it was an object of those operations and the object of Temco's operations at Bell Bay ultimately to recover manganese in a form suitable for use in steelmaking (ie ferromanganese and

ATC 4575

silicomanganese) after a process of beneficiation. The ambit for an error of law on the part of the AAT on these issues is a narrow one. Primarily, in a case such as the present, legal error can arise if:
  • (a) the tribunal erred in concluding that a word did not have a special meaning;
  • (b) a finding on a question of fact was not open on the evidence; or
  • (c) it was not open to the tribunal to hold that the facts found fall within the ordinary meaning of the words used in paragraph (b) of the definition of mining operations in s 164(7).

In my view it is clear that in determining that no special meaning was to be attributed to the words ``minerals'', ``beneficiation'' and ``recovery'', and that the ordinary meaning of each of these words was a question of fact, the tribunal did not err in law. Indeed its determination on each of these matters was supported by the evidence and the cases to which I have referred.

It was also clearly open on the evidence for the AAT to conclude that:

  • • the sintering and smelting operations at Bell Bay involved the beneficiation of a mineral or an ore bearing mineral as an integral part of operations for their recovery;
  • • manganese was a mineral;
  • • the sintering and smelting operation at Bell Bay was a process of beneficiation of pyrolusite and cryptomelane, being ores bearing manganese, for the recovery of manganese in a form suitable for its use in steel making;
  • • the recovery of the manganese in that form, which was an object of the mining operation at Groote Eylandt and, more relevantly, at Bell Bay, was completed upon the completion of the sintering and smelting processes at Bell Bay; and
  • • the fact that the sintering and smelting operations involved changes in chemical composition and occurred at a place far away from the mine site did not prevent those operations falling within the statutory definition of ``mining operations''.

It is unnecessary to cite the specific evidence which supported each of the findings to which I have referred. The evidence on these issues of fact was voluminous, extensive and often conflicting. It was open to the AAT to accept or reject that evidence. It is sufficient, for present purposes, for me to conclude that in preferring the evidence adduced by Temco to that adduced by ACS no error of law has been demonstrated. Similarly, for the same reasons, it was open to the tribunal to hold that the facts found by it fall within the ordinary meaning of the relevant words used in paragraph (b) of the definition of ``mining operations'' in s 164(7).

In my view ACS has not established its general submission that the AAT misconstrued s 164(7) or that it was not open to the AAT, as a matter of law, to conclude that the sintering and smelting operations whereby ferromanganese and silicomanganese are produced at Bell Bay constitute ``mining operations'' as defined in s 164(7).

In addition to ACS's general submissions, a number of related specific submissions were advanced.

ACS submitted that the failure of the AAT to refer to or set out paragraph (a) of the definition of ``mining operations'' in s 164(7) and its focus on paragraph (b) of that definition demonstrates its failure to address properly the significance of the issue of proximity of the mining operation to the mining site. Reliance was placed on the decision of the Full Federal Court in
State Rail Authority of New South Wales v Collector of Customs (1990) 33 FCR 211 at 215 where the Court equated ``recovery'' of minerals with ``activities closely related to the extraction process''. Reference was also made by ACS to the Explanatory Memorandum to the Customs and Excise Legislation Amendment Bill 1995 which stated at 11 that amendments were being made to the definition of ``mining operations'' to ensure that payment of the rebate is to ``those persons who are involved in the mainstream of mining, as understood by the common person''.

ACS then submitted that the operation at Bell Bay was so far removed from the extraction process and that Temco was itself so far removed from the mainstream of mining, or from being a miner, that it was not open, as a matter of law, to the AAT to conclude that Temco conducted mining operations as defined. Whilst it can be accepted that issues relating to proximity can be relevant, they are not determinative: see Australian National Railways Commission at 268-269 and 275, Dyno Wesfarmers and Dampier Salt

ATC 4576

(Operations) at 263. The fact that the AAT referred to paragraph (b) of the definition of ``mining operations'' rather than paragraph (a) does not demonstrate that it was not aware of or did not consider the issue of proximity. It clearly considered the issue but did not regard it as determinative. The problem confronting the submission is that ultimately it concerns the AAT findings on questions of fact which were open on the evidence. In any event, logically proximity cannot be determinative. Section 164(1) is concerned with ``mining operations''. There is no reason why the sintering and smelting which occurs at Bell Bay cannot be carried out at, or in close proximity to, a manganese mining site if the necessary prerequisites for that to occur exist at or near the site. As the Act recognises that beneficiation and recovery ``mining operations'' can occur away from the mining site, the issue of proximity, necessarily, is one of degree and relevance but, of itself, cannot be determinative.

ACS also submitted that the processes at Bell Bay, involving chemical change and additives, were part of the process for manufacturing alloys rather than for the recovery of a mineral. As I have already outlined it was open to the AAT, on the evidence before it, to reject this characterisation of the operation at Bell Bay. The cases to which I have referred demonstrate that recovery of a mineral can occur within the terms of s 164(7) notwithstanding that the process involves removal of impurities, chemical change and the introduction of additives. Whether such a process is aptly described as ``beneficiation'' or ``recovery'' is a question of fact in each case: see Abbott Point at 374; Re Western Mining at 11, 24-26 and 31; ICI Australia at ATC 4219; CLR 567 and BHP Australia Coal at 510.

ACS strongly contended that the AAT erred in law in not concluding that the vendible product, which was said to be both the subject and the object of the relevant mining operations was the pyrolusite and cryptomelane recovered at Groote Eylandt. Strong reliance was placed on the judgment, to which I have referred, of Ryan and Cooper JJ in Abbott Point (at 379). However as I have indicated, subsequent Full Court decisions in BHP Australia Coal and Dampier Salt did not accept that Ryan and Cooper JJ were stating the general proposition contended for by the ACS. Whilst the point at which a vendible product is being recovered is relevant, the cases to which I have referred establish that it is not determinative of when recovery is complete.

Complaint was also made of the failure of the AAT to give reasons for rejecting the evidence of certain witnesses. In my view the AAT adequately expressed its reasons for preferring the evidence upon which it proposed to act. It was not necessary for it to give reasons as to why it did not act upon each item of evidence conflicting with that which it preferred.

Finally, a central theme of the detailed submissions of ACS was that the AAT erred in arriving at its findings of fact on the critical issues. It can be accepted that the evidence adduced by ACS, if accepted, would have resulted in Temco's diesel fuel rebate claims being rejected. ACS's case was persuasive but the AAT was not persuaded. It was open to the AAT to not accept ACS's evidence and to act on the conflicting evidence adduced by Temco, which it preferred. ACS's submissions in substance, if not in form, amounted to an endeavour to obtain a rehearing on the merits rather than a review on the ground of error of law.

For these reasons the appeal of ACS is to be dismissed with costs.

THE COURT ORDERS THAT:

1. The appeal is dismissed.

2. The applicant pay the respondent's costs of and incidental to the appeal.


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