REECE PTY LTD v FC of T
Judges:Harper J
Court:
Supreme Court of Australia (Vic)
Harper J
In this proceeding the plaintiff, a supplier of plumbing hardware, seeks declarations that sales tax is not payable on certain goods: three varieties of hot water units, two water purification units, one grate plug and washer set and one waste disposal unit. Under the scheme of the sales tax legislation, all are subject to sales tax unless they fall within one or more of the exempting provisions of that legislation. The defendant contends that no such provision is relevantly applicable.
The present sales tax regime commenced on 1 January 1993. It is the product of the operation of the Sales Tax (Exemptions and Classifications) Act 1992 (``the 1992 Act'') and the Sales Tax Assessment Act 1992 (``the Assessment Act''). The previous regime had been sustained by no less than 23 enactments: 11 Sales Tax Assessment Acts, 11 Sales Tax Acts (known as ``Ratings Acts'') and the Sales Tax (Exemptions and Classifications) Act 1935 (``the 1935 Act''). Each regime, however, adopted the same broad approach. Goods are subject to sales tax unless they fall within an exemption provision. Thus, the combined effect of the Sales Tax Assessment Act (No. 1) 1930 and the Sales Tax Act (No. 1) 1930 was to require the manufacturer of goods manufactured in Australia and sold by the manufacturer, or treated by the manufacturer as stock for sale by retail, or applied to the manufacturer's own use, to pay sales tax on those goods; but the legislation also provided that, notwithstanding the taxing provisions contained within it, sales tax was not payable by the manufacturer of the goods upon the sale value of goods the sale value of which was, by virtue of the 1935 Act, exempt from sales tax: Sales Tax Assessment Act (No. 1) 1930, s. 20.
The reference in s. 20 to the 1935 Act is, in part, a reference to s. 5(1) of that Act, which is in the following form:
``5(1) Notwithstanding anything contained in any Sales Tax Assessment Act, sales tax shall not, subject to this section, be payable upon the sale value of any goods covered by any item or sub-item in the first column of the First Schedule, under any Act specified
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in the second column of that Schedule opposite that item or sub-item.''
Item 1 of the First Schedule of the 1935 Act appears in the first column of that Schedule. That column is headed ``Sales Tax Exemption Items''. The remaining column (the second column) is headed ``Acts to which Exemption applies''. Beneath those headings appears another, which covers items 1-13 of the Schedule. It extends across both columns, and reads ``Division 1 - Agricultural Machinery, Implements, Equipment and Materials''. Beneath it, in the first column, appears ``Item 1 Agricultural Machinery, Implements and Apparatus (and parts therefor) for use in agricultural industry''; and opposite those words, in column 2, is the notation ``Nos. 1 to 9''. This, of course, is a reference to each Sales Tax Assessment Act beginning with the Sales Tax Assessment Act (No. 1) and ending with the Sales Tax Assessment Act (No. 9) and each Sales Tax Act beginning with the Sales Tax Act (No. 1) and ending with the Sales Tax Act (No. 9). It follows that none of these enactments levy sales tax on agricultural machinery, implements and apparatus for use in agricultural industry.
Each pair of the enactments which, with the 1935 Act, constituted the former regime covered categories of goods, classified according as to whether they were manufactured in Australia or whether they were imported, and according as to whether thereafter they were or were not the subject of particular transactions. In no case was sales tax payable upon the value of goods the sale value of which was, by virtue of the 1935 Act, exempt from sales tax.
Since 1 January 1993, a similar regime has been imposed by the 1992 Act and the Assessment Act. Table 1 of the Assessment Act sets out all the assessable dealings that can be subject to sales tax: s. 16(1). If an assessable dealing takes place on or after 1 January 1993, and no exemption applies, then:
- (a) the dealing is a taxable dealing;
- (b) the person specified in column 3 of Table 1 is the person liable to the tax; and
- (c) the tax becomes payable at the time of the dealing: s. 16(2).
On the other hand, s. 24 provides that an assessable dealing is not taxable if:
- (a) the goods are covered by an exemption item that is in force at the time of the dealing; and
- (b) all the requirements of that item have been met at or before the time of the dealing.
Section 24 of the Assessment Act has a counterpart in s. 4 of the 1992 Act. The latter provides that, if all the requirements of an exemption item as specified in Schedule 1 of the 1992 Act are satisfied at or before the time of an assessable dealing, the dealing is not taxable. Schedules 2, 3, 4 and 5 of the 1992 Act specify the rates of tax that apply to taxable dealings with goods; but if, in a particular case, goods are covered by more than one of those Schedules, then the Schedule with the lower rate applies: s. 15.
The plaintiff alleges that it purchased the goods in question between 1 January 1988 and the date of issue of the present writ (23 February 1996): some of the goods were purchased before, and some after, 1 January 1993. The plaintiff intends to continue in the future to purchase goods of this description: statement of claim, paragraph 6. The vendors have included, and will include, in the price charged to the plaintiff, the amounts of sales tax paid by them: paragraph 7. But this is wrong. According to the plaintiff, all the goods were, under the old regime, exempt from sales tax. They retain that status under the new.
It is convenient to turn first to the hot water units. The plaintiff contends that each of these is exempt because it is covered by item 18(4) of the First Schedule to the 1935 Act. That item appears under the heading ``Division III - Irrigation, Water Supply, Drainage and Sewerage Equipment''. It exempts ``Water tanks and water tank stands, and parts and fittings therefor''. Domestic and commercial hot water units are, the plaintiff contends, water tanks and are therefore exempt.
A tank, according to the Macquarie Dictionary (2nd ed.) is ``a large receptacle for holding, transporting or storing liquids or gas''. Each of the hot water units with which I am concerned is designed to store (or hold) water. The largest of the three has a capacity of 260 litres. The capacity of the smallest is a mere 25 litres. When judged against the capacity of a piece of equipment which clearly falls within
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the meaning of the word ``tank'' - I have in mind the receptacle designed to collect and hold rain water for household use - the capacity of none of the hot water units could be said to be large. Nor, in my opinion, does a hot water unit fall easily under the general rubric of the goods encompassed by item 18 - that is, goods designed to assist in irrigation, water supply, drainage and sewerage.As a matter of first impression, therefore, I conclude that a hot water unit is not a water tank within the meaning of that expression in item 18(4). My first impression is strengthened by the observation that the plaintiff would, I feel confident, never refer in internal communication to any of its hot water units as a ``water tank''. Still less would the plaintiff use that phrase when seeking to interest a potential purchaser in such a product. Speaking personally, I would regard any descriptive reference to a hot water unit as a ``water tank'' as being at least odd. Of course, each of the hot water units with which I am concerned has a storage capacity; and of course that part of the unit in which the heated water is stored might properly be called a water tank. But the unit itself is more than a mere container; so much more, indeed, that the identification of its tank (among all its constituent parts) as the feature which stamps the whole with its character is, I think, wrong.
I recognise that common usage may be a very unreliable point of reference. There are doubtless very many objects to which a number of adjectival phrases could be applied with perfect accuracy, yet considerable incongruity. My point, however, is rather different - and, I think, more persuasive. The incongruity involved in classifying these hot water units as ``water tanks'' arises not because this is an unusual or idiosyncratic albeit broadly accurate classification, but because any such categorisation gives inappropriate emphasis to what seems to me to be a subsidiary element in the whole.
The plaintiff derives comfort from history. On 20 September 1947, sub-item 18(4) was inserted into Schedule 1. It excluded from sales tax:
``Water tanks and water tank stands, and parts and fittings therefor, but not including water storage tanks, stands, parts or fittings of a kind used in connection with hot water systems.''
One conclusion, the plaintiff would assert, is inescapable: that the legislature regarded hot water units as a species of water tank, or at least thought that the removal of doubt warranted their specific exclusion from the coverage of the expression ``water tanks''.
This assertion, however, encounters the difficulty that the exclusionary words of item 18(4) apply not to an entire hot water system, but only to that part of it which consists of a water storage facility.
In 1950, the sub-item was amended, so that all the words from and including the words ``but not including'' were deleted from it. At the same time, item 90F was inserted. It referred to:
``Bath heaters, sink heaters and other water heating and hot water storage equipment, being goods of a kind installed as fixtures in houses.''
Item 90F was repealed in 1985. Its departure saw the introduction into the Third Schedule of item 12(1). That item includes, as being (along with the other items in the Third Schedule) taxable at 10%:
``Water heating and hot water storage equipment, being goods of a kind installed as fixtures in domestic premises, but not including goods covered by sub-item (1) of item 153 [relating to solar energy products] in the First Schedule.''
The plaintiff submits that the hot water storage equipment to which item 12(1) refers does not include the hot water units with which I am presently concerned. Item 12(1), it submits, is restricted to goods such as instantaneous hot water units and boiling water units. This follows because the exclusion from tax of ``water tanks and water tank stands'' (an exclusion which follows from their inclusion in item 18(4) of the First Schedule) over-rides their inclusion in any taxing provision of the sales tax legislation. This, the plaintiff argues, is the effect of s. 5(1) of the 1935 Act. If the legislature intended to exclude hot water units from item 18(4), it would have inserted at the end of the sub-item some such phrase as ``other than goods covered in item 12 of the Third Schedule''. This technique has been adopted in, for example, the drawing of item 82A(1)(g) and item 82A(2)(c).
I do not accept these submissions. In my opinion it is not necessary, if hot water units are
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to be subject to sales tax, specifically to exclude them from item 18(4). Such exclusion is not required, because hot water units were not encompassed by the sub-item in the first place. What the plaintiff submits is legislative recognition of their inclusion is perhaps explicable as an example of legislative caution in ensuring their exclusion where exclusion was desired. A more satisfactory explanation is that a specific reference to their exclusion is necessary because the legislature intended that the tank which formed part of the hot water system be subject to tax. Moreover, in my opinion, the matter is put beyond doubt by the specific inclusion in item 12(1) of the Third Schedule of hot water storage equipment. The restriction suggested by the plaintiff - that the sub-item be confined to goods such as instantaneous hot water units and boiling water units - is not, as it seems to me, appropriate. That restriction would limit the operation of item 12(1) in a way which the plain words of that item do not admit.By parity of reasoning, the same result follows in relation to the present sales tax regime. Item 53 of Schedule 1 to the 1992 Act excludes from sales tax:
``Water tanks or stands for water tanks, but not including:
- (a) water tanks of a kind ordinarily attached to motor vehicles;
- (b) goods covered by item 5 or 6 in Schedule 2.''
Item 6 in Schedule 2 refers to ``water heating and hot water storage equipment of a kind ordinarily installed as fixtures in domestic premises''. The hot water units in question here are ordinarily so installed. The plaintiff nevertheless argues that they are not for that reason subject to sales tax. Given that hot water units are covered by Schedule 1, that coverage protects them from the grasp of Schedule 2: that is the effect of s. 24 of the Assessment Act. And the conclusion that these hot water units are included within the expression ``water tanks'' in item 53 of Schedule 1 is strengthened by the reference in that item to ``water tanks of a kind ordinarily attached to motor vehicles''. If the radiator and the windscreen wiper tank in a motor vehicle are ``water tanks'' then hot water units are likewise ``water tanks''.
I am unable to agree. The fact that the legislature can and does distinguish between water tanks and hot water storage equipment is, it seems to me, illustrated by the use of those two phrases in, respectively, item 53 of Schedule 1 and item 6 of Schedule 2. The exclusion from item 53 of water tanks of a kind ordinarily attached to motor vehicles is explicable as being the result of legislative caution. The inclusion in item 6 of Schedule 2 of hot water storage equipment is, in my opinion, a much stronger indication that such equipment is to be differentiated from, and therefore not included within, the reference to water tanks in item 53 of Schedule 1.
In coming to this conclusion I have, I hope, had proper regard to the principles of statutory interpretation. These are not always easy to apply. Indeed, they can be mischievous unless they are read in context, and employed with discrimination. This is especially so in relation to laws imposing a tax. Here, it is particularly important that common sense direct the inquiry. Otherwise, those rules of construction which are peculiarly designed to do justice to both taxpayer and taxing authority will have the opposite effect. In the present case, water tanks are included in the Schedule which covers goods not subject to sales tax. Water heating and hot water storage equipment is included in one of the Schedules which cover goods upon which sales tax is payable. Common sense dictates that hot water units be classified under the latter Schedule. I accept that classifications of goods attracting exemptions or beneficial rates should be liberally construed unless the text or context requires a narrow construction:
Diethelm Manufacturing Pty. Ltd. v. FC of T 93 A.T.C. 4703 at 4713 per French, J. I also accept that I am required to keep clear of sales tax those goods which are described in the ``exempting'' Schedules, even if such goods are also described in the ``taxing'' Schedules. But these principles can not stand in the way of a taxing Schedule which clearly and with particularity includes the goods in question while, by contrast, the item in the Schedule said to be the source of the exemption refers to them - if it refers to them at all - by broad and inappropriate (rather than particular and apt) description. In these circumstances, the conclusion dictated by common sense, and the conclusion consistent with principle as I understand it, is that hot water units do not fall within item 18(4).
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If the hot water units are not exempt as water tanks then, the plaintiff contends, they are exempt under item 18(2) of Schedule 1 of the 1935 Act. This item must be read together with item (1). I therefore set out below the terms of each:
``(1) Piping or tubing made principally of metal, wood, stoneware, earthenware, concrete, reinforced concrete, reinforced cement, fibro-cement, asbestos-cement, blue metal or other stone, bitumen, pitch, tar or synthetic resin or of combinations of any two or more of those materials, being piping or tubing for use for irrigation, water supply, drainage or sewerage purposes, but not including rubber hose or rubber tubing or any hose or tubing of a kind used principally for any purposes for which rubber hose or rubber tubing is ordinarily used.
...
(2) Fittings (and parts therefor) for goods covered by sub-item (1) or (1A), including taps, cocks, valves, faucets, inspection boxes and doors, clear outs, floor wastes, grates, gullies, traps, siphonic connexions, pipe heads, shoes, stop blocks, meters and meter covers, hydrants and hydrant covers, hydrant pit frames and covers, valve covers, valve pit frames and covers and air valve frames and covers.''
The plaintiff submits that hot water units (and the other goods with which I am concerned) are fittings for pipes made principally of either metal or polyvinyl chloride (``PVC''), which is a form of synthetic resin. The expression ``fittings'' is, so the plaintiff submits, to be given its ordinary meaning; and this is broad enough to cover hot water units once they have been connected to the inlet and outlet pipes which deliver the cold water to, and conduct the hot water from, each unit. The plaintiff relies upon the definition of the term ``fittings'' to be found in the Macquarie Dictionary (2nd ed.), the relevant portion of which reads:
``5. anything provided as equipment, parts, accessories, etc.
6. (pl.) furnishings, fixtures, etc.''
The plaintiff also relies on
The Gaslight and Coke Company v. Hardy (1886) 17 Q.B.D. 619. The company was a supplier of gas. It was also the owner of a quantity of gas stoves. These it let on hire to its customers. In so doing, it claimed the protection of s. 14 of the Gasworks Clauses Act 1847. That section provided that the company ``may let for hire... any fittings for the gas... and such... fittings shall not be subject to distress.'' The defendant seized one of the company's gas stoves as a distress for rent owed to the defendant by a customer of the company. The question was whether the stove was a ``fitting for gas''. The Court of Appeal held that it was. Lord Esher, M.R., at 621, distinguished between the phrase ``gas fittings'' and the expression ``any fittings for the gas''. The latter was not, whereas the former was perhaps, trade phraseology. Because the expression ``any fittings for the gas'' did not have a trade meaning in addition to its ordinary or popular meaning, it was necessary to ``read it... in the ordinary sense as applied to the subject matter, which is the supply and consumption of gas.'' So read, its field was wide, and Lord Esher saw no reason for cutting it down. In his opinion (at 622) the expression extended ``to all the apparatus used for the supply and consumption of gas.''
Bowen, L.J. agreed. In doing so, he stressed that the Court had to decide the meaning of the term ``fittings for the gas'', but not the meaning in the abstract of the term ``fittings''. His Lordship added (at 623):
``It appears to me that the legislature when it speaks of `fittings for the gas' means an apparatus to enable the gas to be burned efficiently and conveniently for light or for heat. It does not appear to me to follow that, under the term `fittings for the gas,' an apparatus which is used for utilising the heat of the gas after it has been burnt could be included. But at all events the words do include, as it seems to me, a machine the only object of which is to burn, and to burn effectively for convenience in the house, the gas which is supplied. I think, therefore, it is a fitting for the gas.''
Fry, L.J. was of the opinion (at 624) that the expression ``fittings for the gas'' included ``all instruments which are adapted for the supply and beneficial consumption of the gas''. The stove which had been the subject of seizure was, His Lordship concluded, such an instrument. It was designed to burn gas and thereby produce heat. This, because it amounted to the beneficial and useful consumption of gas, qualified the stove as a ``fitting for the gas.''
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I have referred to The Gaslight and Coke Company case at some length because I think that it is particularly helpful in the present context. It is helpful because it highlights a point of distinction which is relevant to the proper characterisation, for present purposes, of each of the articles the subject of this judgment.
The Court of Appeal in The Gaslight and Coke Company case was concerned with fittings for an element such as gas or water; and fittings of this kind may, and in my opinion should, be distinguished from fittings for a product - such as pipes - to which those fittings are fitted. The latter are the subject of, and are therefore covered by, item 18(2). Prime examples are taps, cocks and valves. They are ``fittings'', but not (in contradistinction to The Gaslight and Coke Company's gas stoves) because they consume a source of energy, or because they operate upon an element, carried to them by the pipes or tubes with which they are connected. Rather, they are ``fittings'' because they are a subservient appendage to (for example) piping. Their purpose is to ensure the efficient and appropriate operation of the pipe.
It is such fittings which, being attached to piping or tubing made from the specified materials and for use for irrigation, water supply, drainage or sewerage purposes, the legislature intended to exempt from sales tax. By using the expression ``fitting for [piping or tubing made principally of... synthetic resin]'' the legislature, it seems to me, intended to exempt from sales tax a class of goods (piping or tubing which is made from one or other of the specified materials, and which is to be used for one or other of the specified purposes) as well as articles fitted to them which have a use which is auxiliary to those uses.
A hot water unit is not, in my opinion, a fitting for a pipe. Its purpose is not an auxiliary purpose to that of the pipes to which it is connected. It is not a subservient appendage to that piping, with its use being ``for'' the piping. It is not ``for'' the piping at all. It is ``for'' heating and storing water brought to it and carried from it by pipes. It is the pipes which are ``for'' the hot water unit.
The same may be said of the water purification units. It is true that the pipes with which they are connected are not designed to serve them as are the pipes with which the hot water units are connected. On the other hand, the water purification units operate upon water carried to them and from them by pipes employed for that purpose. They do not assist the pipes to do the job of pipes. They have no use which is auxiliary to the use of the pipes. Their purpose is to enhance the quality of that which the pipes help to transport; it is not to assist in the transportation. Each of them is attached (and therefore ``fitted'') to a pipe; but they are not fittings for piping.
The grate plug and washer set is, according to this analysis, in a different position. So is the waste disposal unit. Each may be said to complement the purpose for which the pipes, to which they are fitted, were designed. The grate plug and washer set allows water, which has been discharged (generally via a tap) from the system of piping through which it was delivered, to be collected used and discharged back into the system from which it came. The waste disposal unit allows that system to accept (and be transported through it to a point of ultimate discharge) waste which might otherwise not enter the system at all or, if it did, which might cause a blockage. In each case, a principal purpose is the movement of water. In one case, another principal purpose is the collection of water. In each case, however, the ``fitting'' plays a role which is secondary to that of the pipes themselves. It is therefore proper to describe the fitting as one ``for'' piping.
The defendant submits that neither the grate plug and washer set nor the waste disposal unit is a ``fitting for piping'' because neither is directly fitted to both an inlet and an outlet pipe. The grate plug and washer set is fitted at one end to a sink. So is the waste disposal unit. In my opinion, however, this does not remove either article from its proper classification as a ``fitting for piping''. Nor does the membership of the plug in the group which is the grate plug and washer set remove that group from the genus. Of course the plug itself cannot be a fitting. But it is the combination, as a combination, not its individual parts, with which we must be concerned.
It is arguable, on the analysis adopted by me, that baths, sinks, troughs and basins, as well as the grate plug and washer sets without which they cannot function, are fittings for piping. This argument has obviously occurred to the persons charged with the drafting of the sales tax legislation. Between 25 October 1935 and
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26 September 1936 item 18(2) was in the following form:``Fittings for goods covered by sub-item (1) of this item, (but not including baths, basins, sinks, troughs, cisterns, pans or other fittings, or taps or water meters, for installation in or in connection with houses or other buildings).''
The item was amended as from 26 September 1936. It then read:
``Fittings (and parts therefor) for goods covered by sub-item (1) of this item, including taps, cocks, valves, faucets, inspection boxes and doors, clear outs, floor wastes, grates, gullies, traps, siphonic connections, pipe heads, shoes, stop blocks, meters and meter covers, hydrants and hydrant covers, hydrant pit frames and covers, valve covers, valve pit frames and covers, and air valve frames and covers, but not including baths, indoor basins and sinks, troughs, cisterns, pans or other similar fittings for installation in, or connection with, houses or other buildings.''
For reasons which I have already endeavoured to express, it is not in my opinion permissible to draw firm conclusions from the mere fact that the legislature sees fit specifically to exclude from the coverage of a word with a wide meaning objects which might or might not be included within that meaning. It is nevertheless possible to say that the history of item 18(2) is consistent with the analysis which seems to me to be otherwise attractive.
The position under the 1992 Act and its companion, the Assessment Act, matches the position under the former regime. Item 50 of Schedule 1 of the 1992 Act includes as items which are exempt from sales tax piping or tubing for use by a person mainly for the purposes of irrigation, water supply, drainage or sewerage. As with similar provisions in the Schedule, rubber hose and rubber tubing are not included in the exemption; but goods for use by a person exclusively as fittings for exempt pipes and tubes are likewise exempt.
For the reasons I have already given, neither the hot water units nor the water purification units are fittings for piping or tubing. The opposite is true of the grate plug and washer set and the waste disposal unit. This conclusion is not affected by the introduction, into item 50(3), of the word ``exclusively''. Each of the grate plug and washer set and the waste disposal unit are used exclusively for the single purpose for which they were designed.
The defendant contends for a different construction of the word ``exclusively''. It was submitted on behalf of the Commissioner that its use in item 50(3) means that the relevant goods - in this case the grate plug and washer set and the waste disposal unit - ``should not be for use in any other way or for any other purpose except as a fitting for piping'': defendant's amended outline of submissions dated 4 April 1987. If the goods have a use (as, the defendant contends, they have here) beyond merely being fitted to a water or drainage pipe then they do not satisfy the exemption.
The waste disposal unit, as described in the defendant's amended outline of submissions, is an electrically powered mechanical appliance installed in a kitchen sink to macerate food scraps occurring in food preparation which are disposed into the sink waste pipe for discharge into the sewerage system. It is the waste disposal unit's ability to macerate which is not only the reason for its existence but necessarily gives it a use beyond that of a fitting.
I cannot accept this argument. In my opinion, the waste disposal unit is a fitting despite the fact that it also macerates food scraps. It would be inconsistent, in the light of this conclusion, to hold that the expression ``use... exclusively as fittings'' carries the meaning which the defendant would seek to give to it.
If this be correct in the case of the waste disposal unit, then it must also be correct in the case of the grate plug and washer set. The latter's only function is to prevent or allow, as occasion demands, the passage of water from sink or trough to pipe.
Other provisions in the relevant legislation exempt fittings from sales tax. Piping or tubing of a kind used exclusively, or primarily and principally, in the construction or repair of, and wrought into, or attached to, so as to form part of, buildings, fixtures, structures or other works, are removed from liability by the operation of item 82A(1) of the First Schedule to the 1935 Act. Similarly exempt are fittings for such piping or tubing: item 82A(2). Both item 82A(1) and item 82A(2), however, specifically exclude from the exemption goods covered by, or referred to in, item 12 of the Third Schedule. The latter covers water heating and hot water storage equipment which, accordingly, are
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thereby made subject to tax. It also covers, by sub-item (2), appliances or equipment for filtering water, being goods of a kind installed as fixtures. The water purification units are installed as fixtures. Item 12 therefore explicitly includes the water purification units among those goods upon which sales tax is and was payable under the former regime.Even if the water puritication units were fittings for piping, an argument that they were covered by (and therefore exempted by) item 18(4) would not succeed in the face of item 12. In specifically excluding equipment for filtering water from exemption, Parliament cannot also have intended (inconsistently) to exempt them under a different exemption item. And resort to s. 5(1) of the 1935 Act will not help. That section is limited to anything contained in any Sales Tax Assessment Act. Item 12 is in the Third Schedule to the 1935 Act.
The piping or tubing to which each of the articles the subject of this judgment are attached is used primarily and principally in the construction of, and is wrought into or attached to, buildings so as to form part of those buildings. It follows that, insofar as the articles in question are fittings for such piping and tubing, they too are exempt. But I have already held in relation to a like legislative provision that only the grate plug and washer set and the waste disposal unit are (for relevant purposes) fittings. In my opinion, the same conclusion follows, for the same reasons, in relation to item 82A.
This does not mean that the grate plug and washer set, and the waste disposal units, have sailed through the taxing net of the old regime and so proceeded into a taxless sea. Item 1(h) of the Third Schedule of the 1935 Act (which Schedule is, of course, a taxing Schedule) includes goods of a kind ordinarily used for household purposes ``namely... appliances for use for culinary purposes''.
The waste disposal unit is an appliance for use for culinary purposes.
Item 14(a) of the Third Schedule is even more definitive. It includes household fittings (and parts for household fittings, including plugs and washers) of a kind installed in houses so as to become fixtures. Specifically mentioned (among other things) are sinks. The grate washer and plug set, and the waste disposal unit, are both parts for sinks.
The plaintiff argues that they are not. It points out that these goods are sold separately; so that, when one purchases a sink, one does not necessarily purchase the grate plug and washer set without which the sink would be useless. Although the one cannot perform any useful function without the other, each is complete in itself; they are separate items on the shelves of the retail or wholesale outlets from which they are bought and sold. Even more is this true of waste disposal units.
I do not accept that their separateness excludes the grate plug and washer set and the waste disposal unit from the class of ``parts for sinks''. They are symbiotic before they are separate. There are many items which are in one sense complete in themselves, and which are traded as individual goods, but which are designed to be used only as a part for something else. The goods in question here fall into that category.
In saying this, I do not wish to cast doubt upon the proposition that ``[o]ne thing does not become part of another simply because the latter thing cannot be put to proper use without the aid of the former, even if, in use, the two things are fixed together'':
DFC of T v. Polaroid Australia Pty. Ltd. 71 ATC 4249 at 4252; (1972) 46 A.L.J.R. 32 at 34, per Gibbs, J. Of course a film is not part of a camera, or a bullet part of a gun. Indeed, the better view is doubtless that a waste disposal unit is not part of a sink. In my opinion, however, it is nevertheless a part for a sink. Even more is this so of a grate plug and washer set.
The defendant relies not only on item 14(a) but also on item 14A of the Third Schedule. The latter item covers, relevantly for present purposes, bathroom fittings of a kind installed as fixtures in houses or other buildings. It also covers parts for such fittings. Clearly, however, it does not cover a waste disposal unit. It might be said, accurately, to cover a grate plug and washer set designed to be fitted to a bath. I do not need, however, to come to any conclusion about this since in my opinion each of the goods in question fall under item 14(a).
The result is that the grate plug and washer set and the waste disposal unit fall within an exempting Schedule as well as within a taxing Schedule. In these circumstances, each should, I think, be held to be exempt from sales tax. Any other conclusion would offend against the principle that ambiguities in legislation
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imposing tax should in general be resolved in favour of the taxpayer rather than in favour of the taxing authority. Any other conclusion would also fail to give effect to the injunction in s. 5(1) of the 1935 Act that sales tax shall not be payable upon the sale value of any goods covered by any item or sub-item in the First Schedule.The defendant seeks to avoid this result by pointing to the fact that items 14 and 14A of the Third Schedule are referred to in item 82(1)(aa) of the First Schedule as a specific exclusion from exemption. That is indeed so. Item 82(1) covers:
``Bricks, blocks, shapes, tiles, sections, slabs and other structural or architectural building units, whether made of burnt clay, marble, granite, stone, cement, concrete, magnesite, cinder-cement, asbestos-cement, fibro- cement, coke-breeze, terra cotta, gypsum, terrazzo, or of any other materials or mixtures of materials...''
The sub-item then proceeds to exclude from its provisions goods covered by item 14 or 14A in the Third Schedule, together with certain other goods with which I am not presently concerned.
It may happen that goods are (with the qualification to which I am about to come) covered by more than one exempting item as well as by a taxing item. Where, however, one of the exempting items specifically excludes certain goods, otherwise exempted, from the cover of the exemption, then the goods thus excluded are in my opinion subject to tax. This is so in spite of the failure (on this hypothesis) of the other exempting item to similarly exclude the goods from its exempting cover. If Parliament specifically excluded particular goods from exemption then it cannot also have intended (inconsistently) to exempt those goods under a different exemption item. In these circumstances, the ambiguity which arises where a non-exclusionary exempting item and a taxing item cover the same goods does not arise.
I do not think, however, that this reasoning applies to item 82. The goods covered by this item do not include grate plug and washer sets. Nor do they include waste disposal units. Not being included in the exemption in the first place, they cannot be excluded from the exemption by paragraph (aa) of the item.
Earlier in this judgment, I concluded that the water purification units are not fittings for piping or tubing. If I am wrong about that, I am nevertheless of the opinion that they remain subject to sales tax by virtue of item 6(2) in Schedule 2 to the 1992 Act. It is true that, if the water purification units are fittings, then they are covered by an exempting provision; and if the only support for an attack on that cover is a taxing item of equal status, then the exemption stands preserved. But in my opinion item 6(2) is of more than equal status. It covers appliances or equipment for (among other things) filtering water, if those appliances or that equipment are of a kind ordinarily installed as fixtures. The water purification units are, in my opinion, ordinarily so installed. It is true that a portion of the unit is, if the unit is to function efficiently over time, removed so that it can be cleaned. The remainder of the unit, however, remains fixed to the pipe.
The result, therefore, is that item 6(2) refers specifically and with particularity to the goods in question; whereas the exempting item is more general. In these circumstances, there is not - as it seems to me - any ambiguity. The intention of the legislature is in my opinion plain: to render water purification units subject to sales tax under the present regime.
Item 39(1) of Schedule 1 to the 1992 Act exempts from sales tax fittings for piping ordinarily used as raw materials in the construction or repair of buildings or other works that are attached to land. The plaintiff contends that this covers the grate plug and washer set and the waste disposal unit. The piping to which they are attached is used as raw material in the sense required by s. 7(2) of the Assessment Act, which provides that:
``Goods are taken to be used as raw material in constructing or repairing property if, and only if, the goods are dealt with in such a way in constructing or repairing the property that the goods, or some essential element of the goods, become an integral part of the property.''
The pipes to which the goods in question are fitted are doubtless an integral part of a building. The fittings themselves are not so obviously included. But whether or not the fittings are, or are required to qualify as, raw materials if they are to obtain exempt status, is not of present importance. Even if the grate plug and washer set and the waste disposal unit
ATC 5015
are fittings for piping within the meaning of that expression in item 39(1), the coverage provided by that item is general. By contrast, Parliament has specifically included in Schedule 2 of the 1992 Act goods of the kind here in question. Item 5(3) of that Schedule covers goods marketed principally as parts for (among other things) sinks. In my opinion, for the reasons to which I have already referred, the grate plug and washer set and the waste disposal unit are each marketed principally as such parts. It follows that they are subject to sales tax under the present regime.In my opinion, the plaintiff is entitled to a declaration that, before 1 January 1993, grate plug and washer sets and waste disposal units were exempt from sales tax being goods which fell within the description of goods in item 18(2) and item 82A(2) of the First Schedule to the Sales Tax (Exemptions and Classifications) Act 1935. Othewise, however, the plaintiff is not entitled to the declarations which by this proceeding it sought.
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