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CASE 21/98

Members:
KL Beddoe SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 6 November 1998

KL Beddoe (Senior Member)

The applicant company, M Pty Ltd seeks review of objection decisions of the Commissioner dated 15 July 1997 in relation to the refund of sales tax paid for the period 1 July 1989 to 31 December 1992. The applicant company is involved in the transportation industry and operates specialised heavy vehicle fleets that in particular, transport harvested sugar cane to mills for processing during the crushing season for a duration of approximately one half of the year (July to December). For the majority of the remainder of the year (late December to May), the specialised fleet vehicles are used in the transport of harvested corn and corn silage used for stock feed.

2. The particular fleet vehicles comprise a prime mover and trailer described by the applicant in its objection as ``specialised articulated cane vehicles'' upon which sugarcane bins (``canetainers'') are loaded. The canetainers remain the property of a Sugar Co- Operative company but are hired by the applicant company for the corn harvest. The applicant's case essentially concerns the issues of whether:

  • • the vehicles are ``manufactured'' (as defined in s 3 of the Sales Tax Assessment Act (No 1) 1930 (``the No 1 Act'')) due to their specialised design and conversion by the company in order to load and carry the canetainers;
  • • the specialised articulated cane vehicles (``the vehicles'') are exempt from sales tax pursuant to item 13 of the First Schedule to the Sales Tax (Exemptions & Classifications) Act 1935 (``the Exemptions Act'') as being machinery for use in the agricultural industry that are goods of a kind exclusively used in that industry;
  • • the spare parts and tyres associated with the haulage vehicles were used as raw materials in the manufacture or in the repair of the vehicles as aids to manufacture or auxiliaries to aids to manufacture;
  • • any other ground of refund that may apply;
  • • if exemptions are found to apply as contended by the applicant, whether there is a legislative power to refund the sales tax paid in respect of spare parts and tyres

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    purchased by the applicant company. It is not in dispute that such a refund power exists with respect to the prime movers.

3. At the hearing of this matter, Mr Keane QC appeared for the applicant and Mr Logan appeared for the respondent. The s 37 documents lodged in both matters were admitted into evidence as were a number of documents tendered as exhibits by both parties. Oral evidence was given by Mr M, managing director of the applicant company; Mr Grahame Dines, Chief Cane Inspector; Mr C, Spare Parts Manager of the applicant company; Mr Ken Baker of Kenworth Trucks; and Mr Ronald Worth, Chief Cane Inspector. An affidavit of Mr York, Plant Manager (corn processing industry) was admitted into evidence as were a video and photographs depicting the use and components of the vehicles.

Background

4. The applicant operates various transport fleets used for sugarcane/corn transport and interstate haulage. Since 1972, the applicant has held a contract for the transport of harvested sugarcane from farms to sugar mills at three sites. It appears that the original contract was assigned in 1978 to a State Co-operative company (``the co-operative company'') which operates the three mills and the applicant has continued to provide services in accordance with that contract to the new assignee. Sugar cane farmers in each particular ``mill area'' are generally members and shareholders in the co- operative company.

5. For the period 1 July 1989 to 31 December 1992, the applicant purchased spare parts and tyres used in connection with the ``manufacture and on-going repair'' of 10 K125 Kenworth vehicles (``the K125 vehicles'') being ex- interstate haulage vehicles to enable them to be used in sugarcane transport. The sales tax paid was $254,426.62 for which the applicant seeks refund (T10-QT97/313). For the same period, the applicant also purchased 10 new K100E Kenworth vehicles (``the K100E vehicles'') for cane transport use for which invoices were issued dated 22 October 1997 (T9/F146-155-QT97/313). A statement from the distributor lists the sales tax paid on each vehicle as $27,786.60 being a total of $277,866.00 for the 10 K100E vehicles (T9/F145-QT97/313) for which refund is also sought.

6. On 9 March 1994 the Deputy Commissioner of Taxation advised the applicant that its application for refund of sales tax of $277,866.00 for the K100E vehicles was refused (T7-QT97/313). On 13 December 1993, following further representations and discussions with the applicant, the respondent allowed exemption in relation to the semi- trailers under item 13(1) of the First Schedule to the Exemptions Act. The Deputy Commissioner considered that the trailers were of a kind used exclusively or primarily and principally in the agricultural industry. An exemption was not however allowed in relation to the prime movers nor the combined vehicle being the prime mover and semi trailer under item 13(1), nor was the process involved found to be manufacture (T6-QT97/312). The Deputy Commissioner considered whether item 36(1) as relates to subcontractors applied to the combined vehicle and determined that it did not because the vehicles did not satisfy the ``use'' requirements under items 1, 2, 18, 23, 28, 29, 30, 33, 34 or 35 of the First Schedule to the Exemptions Act.

7. In relation to the claim for refund of sales tax for the spare parts and tyres, an application for refund was lodged on 30 September 1993. On 13 December 1993 the Deputy Commissioner refused to allow the refund (T6-QT97/312).

8. The applicant lodged objections against the decisions of the Deputy Commissioner on 11 February, 1994 in relation to the spare parts and tyres (T7-QT97/312) and on 6 May 1994 in relation to the purchase of the 10 K100E vehicles (T8-QT97/313) which were based on similar grounds of appeal under the general grounds of: manufacture, quotation, classification of the goods, aids to manufacture, eligible business goods, refund - section 26(3), general old law refund and miscellaneous.

9. By letters dated 15 July 1997, the Deputy Commissioner advised the applicant in relation to each matter that the objections were disallowed (T12-QT97/312-313). In relation to the claim for refunds for both the K100E vehicles and the spare parts and repairs to the K125 vehicles, the Deputy Commissioner considered in detail the arguments and case law of each ground of objection and summarised his conclusions as follows:

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``... the Commissioner is not satisfied that the taxpayer is entitled to a refund of sales tax under sub-section 26(3) of the STAA (No. 1) and regulation 48(1)(e) of the Sales Tax Regulations.

Reasons

• Item 13

Not used exclusively, or primarily and principally in the agricultural industry, ie. not in connection with the gathering of the crop.

• Manufacture

Manufacture did not occur under the ordinary and extended meaning of `manufacture'. The work carried out did not result in a commercially distinct article.

• Aids to manufacture

Does not fall within the definitions

• Auxiliaries to aids to manufacture

Does not fall within the definitions

• Eligible business goods

Does not fall within any of the categories set out in Clause 3 of the ST(E&C) Act

• Exemption Items 113A to 113D, 113F and 155 to 159

Does not satisfy the conditions set out in the above mentioned exemption Items.''

10. The applicant's written grounds of appeal in its application to this Tribunal from those objection decisions were identical to the grounds put forward before the Deputy Commissioner in considering the objection.

Legislation

11. The parties referred to and relied upon the application of the following applicable legislation:

``Sales Tax Assessment Act (No 1) 1930

26(1) Subject to sub-section (1A), where the Commissioner finds in any case that tax has been overpaid by a person, the Commissioner shall-

  • (a) refund the amount of any tax overpaid; or
  • (b) apply the amount of any tax overpaid against any liability of the person to the Commonwealth, being a liability arising under, or by virtue of, an Act of which the Commissioner has the general administration, and refund any part of the amount that is not so applied.

26(1A) Sub-section (1) does not apply in relation to any tax paid by a person unless the Commissioner is satisfied that the tax has not been passed on by the person to another person, or, if passed on to another person, has been refunded to the other person.

26(3) Where the Commissioner is satisfied that-

  • (a) tax has been paid in respect of the sale of goods to a registered person who was required to quote his certificate in respect of the purchase of those goods but who refused or failed to do so;
  • (b) the tax has been wholly or partly included in the price for which that registered person purchased the goods; and
  • (c) the tax has not been passed on by that registered person to some other person or, if passed on to some other person, has been refunded to that other person by the registered person;

the Commissioner may, if so satisfied-

  • (i) within a period of 3 years; or
  • (ii) on consideration of a claim in writing lodged with the Commissioner, within a period of 3 years,

from the date upon which the goods were so sold, pay to that registered person an amount equal to the tax so paid and included.

Sales Tax (Exemption And Classification) Act 1935

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 in the second column of that Schedule opposite that item or sub-item.

5(2) Where, in the second column of the First Schedule reference is made, opposite an item or sub-item in the first column of that Schedule, to the Sales Tax Assessment Act (No. 9) 1930-1935 and to any one or more of the following Acts:

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  • Sales Tax Assessment Act (No. 1) 1930-1935,
  • Sales Tax Assessment Act (No. 2) 1930-1935,
  • Sales Tax Assessment Act (No. 3) 1930-1935,
  • Sales Tax Assessment Act (No. 4) 1930-1935,

but to no other Sales Tax Assessment Act, the goods covered by that item or sub-item shall not be deemed to include goods which are imported into Australia.

5(3) Where, in the second column of the First Schedule reference is made, opposite an item or sub-item in the first column of that Schedule, to the Sales Tax Assessment Act (No. 9) 1930-1935 and to any one or more of the following Acts:

  • Sales Tax Assessment Act (No. 5) 1930-1935,
  • Sales Tax Assessment Act (No. 6) 1930-1935,
  • Sales Tax Assessment Act (No. 7) 1930-1935,
  • Sales Tax Assessment Act (No. 8) 1930-1935,

but to no other Sales Tax Assessment Act, the goods covered by that item or sub-item shall not be deemed to include goods which are manufactured or produced in Australia.

THE FIRST SCHEDULE*2*

1(1) In this Schedule, unless the contrary intention appears-

  • `agriculture' includes viticulture, horticulture, pasturage, apiculture, poultry farming, dairy farming, and other operations connected with the cultivation of the soil, the gathering in of crops and the rearing of livestock;
  • `aids to manufacture' means goods for use by a manufacturer in the course of carrying on a business (where that use is exclusively, or primarily and principally, for the purposes of that business), being-
    • (a) machinery, implements and apparatus for use exclusively, or primarily and principally-
      • (i) in the actual processing or treatment of goods to be used in, wrought into or attached to goods to be manufactured by him;
      • (ii) in any processing or treatment by which the goods to which that processing or treatment is applied are used in, wrought into or attached to goods to be manufactured by him;
      • (iii) in any processing or treatment for the purpose of bringing goods manufactured by him into, or maintaining those goods in, the form or condition in which they are to be marketed or used by him;
    • ...
    • (k) goods for use in connection with the manufacture for sale of goods, if the first-mentioned goods are to be sold to the purchaser of the goods to be so manufactured, except where the goods to be so manufactured-
      • (i) are covered by an item in this Schedule; or
      • (ii) are to be sold by the manufacturer to a person who quotes his certificate of registration in respect of the purchase of those goods and who furnishes to the manufacturer a certificate in writing that the first-mentioned goods are not for resale to a person to whom the goods to be so manufactured are also to be sold;
    • (m) parts for any goods expressly excluded from this definition;
    • ...

`auxiliaries to aids to manufacture' means goods for use by a manufacturer exclusively, or primarily and principally-

  • (a) in the processing or treatment of goods to be used by him as aids to manufacture;
  • ...
  • (c) in the transportation, within premises in which they are to be used by him as specified in this paragraph, of goods-
    • (i) to be used by him as aids to manufacture; or
    • (ii) to be used by him exclusively, or primarily and principally, in any activity as specified in this definition, not being an activity involving the use

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      of goods which are expressly excluded from this definition;
  • ...
  • (g) as integral parts in the construction in situ or repair of machinery, implements or apparatus (not being machinery, implements or apparatus which is expressly excluded from this definition) to be used by him exclusively, or primarily and principally, in any activity as specified in this definition,

but does not include goods which are of any of the kinds expressly excluded from the definition of `aids to manufacture';

...

`general purpose road vehicle' means a road vehicle of a kind ordinarily used for the transport of persons or the transport or delivery of goods;

...

`mainly' means to the extent of more than 50%;

...

`parts' in relation to road vehicles, includes bodies for those road vehicles (including insulated bodies, tank-bodies and other bodies designed for the transport or delivery of goods of particular kinds), underbody hoists and other equipment or apparatus of a kind ordinarily fitted to road vehicles, being equipment or apparatus used in connection with the transport or delivery of goods by those road vehicles.

1(8) The definition of `mainly' in subclause (1) does not affect the meaning of the expressions `ordinarily,' `primarily and principally', `primarily or principally', `primarily' or `principally', when used elsewhere in this Act or in any other law of the Commonwealth relating to sales tax.

Sales Tax Exemption Items

13(1) Machinery implements and apparatus, n.e.i., (and parts therefor), for use in agricultural industry if, in the opinion of the Commissioner, they are goods of a kind used exclusively, or primarily and principally, in that industry.''

Facts

12. The collection and transport of sugarcane from co-operative members' farms to mills is regulated in accordance with the provisions of various contracts entered into between the parties. For part of the relevant period, written contracts were executed and applicable, the terms of which were admitted into evidence. These contracts are considered under the general headings of Member Agreements and Transport Agreements.

Transport Agreements (Co-op Company - Applicant Agreements)

13. It was not in dispute that the applicant was contracted by the Co-op company to transport by road to the mill, cane harvested by farmers in the ``mill area'' from delivery points (or ``pads'') on or adjacent to their farms and to unload that cane in the mill carrier (Ex A - Attachments RVM1 and RVM2). For the relevant period, two forms of contract were entered into between the Co-op company and the applicant for the respective periods of 1 July 1983 to 31 December 1990 and 1 July 1992 to 31 December 1999 as relates to each of the three mills. For each period separate contracts were entered into for each of the three mill areas, the terms of which were said to be the same (except for appendices particular to each mill area). The two forms of contract were also essentially the same for each period however variations were apparent in the common clauses (1)(b) and (1)(e) as relates to the supply of equipment. Other minor variations necessary to adapt the earlier contract for the later period were also made.

Member Agreement (Co-op Company - Member Agreement)

14. The Co-op company is responsible for the regulation and control of sugar milling operations under the general supervision of a Chief Cane Inspector assigned to each particular mill area. Contracting sugar cane farmers are members of the Co-op company and enter into agreements with the Co-op company to plant, cultivate and harvest crops sugar cane in such quantities as the Co-op company shall direct and in accordance with the provisions of the Agreement as to areas of land to be cultivated, approved cane varieties, disease regulation, harvesting, delivery, access, price and such other matters as specified in the Agreement (Ex D). Production quotas per crushing season for each member are set by a Farm Rating Committee in each mill area and a Harvesting Tribunal is constituted for each mill area to adjudicate on matters of harvesting in

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relation to individual members, groups of members and harvesters.

15. Harvesting groups for each mill area are established by the Chief Cane Inspector between members and a harvesting rotation agreed to between the members prior to the start of the crushing season to ensure the orderly and efficient harvesting and transport of cane (Ex D - Cl 2(a)). Sugar cane is delivered by members into canetainers provided by the Co- op company at designated delivery pads on or adjacent to a member's farm in such quantities as directed by the Co-op company and with an attached and completed delivery ticket for each load. (Ex D - Cl 2(c)). Provision is made within the Member Agreements for persons or corporations authorised by the Co-op company to have access through member's farms for the purposes of delivery, storage and loading of sugar cane and maintenance of the delivery pad (Ex D - Cl 2(c)(iii)).

Cane harvesting operations

16. It is well known that harvested cane is a perishable product and must be processed through the mill within 12 to 16 hours but preferably less than 12 hours after cutting to maximise the sugar recovery and quality of the product. It is therefore necessary to record the time when each canetainer in the district is harvested in order to ensure that the oldest bins are hauled to the mill first.

17. In the relevant region in which the three mills are located, sugar cane is mechanically harvested by growers and side-tipped into a tractor drawn trailer. The harvesting equipment is generally owned by the Co-op company or a group of framers. In the process of harvesting, the cane is cut into 30 cm long lengths known as ``billets'' and then dumped from the harvesting hopper trailer into empty 23.6 tonne canetainers placed at the delivery pad usually located on each respective member's property and situated close to shire roads.

18. Mr Dines, Chief Cane Inspector explained that for his particular mill area, and for the period 1989 to 1992, cane was first burnt to remove rubbish then harvested. The times involved in each step of the tipping form the hopper to the canetainer and the loading of the canetainer were considered crucial. Mr Dines in his evidence stated that the time to tip from the hopper into a canetainer was 1 minute and that the loading of the canetainer onto the semi- trailer took 5 minutes at the delivery pad. He otherwise agreed with the times for each step as specified in the diagram at Appendix 1 [see page 281] as attached depicting the harvesting and loading operations.

19. One delivery pad may be used by a group of growers but there is no sharing of the product or mixture of each grower's product in a canetainer. Cane delivery pads in one mill area are normally fan shaped in a quadrant of a circle with a radius of about 50m. The apex of the quadrant points towards the road (public) and canetainers are placed in pairs towards the back of the ``fan'' to give ample space for filling, dropping off and picking up. However in another of the mill areas, the pads tend to be ``stack'' type ie one canetainer placed in front of another or rectangular in shape.

20. Once collected from the pad and loaded onto the articulated road transport vehicles, the canetainers are delivered to the relevant mill by the applicant at which point the delivery docket to each load is removed and the product assessed at the mill for sugar content and other factors as discussed further to determine pricing.

21. Transport scheduling is co-ordinated by a Mill Traffic Officer who maintains radio contact with all cane haulage trucks, the harvester operator and Co-operative company field staff (QT97/312 - T3/F90). Each cane transport vehicle is fitted with a two-way radio system installed and maintained by the Co-op company in accordance with the terms of agreement specified in the Transport Agreements (Ex A - Attachments RVM1 and RVM2 Cl 1(g)). Both Mr Dines and Mr Worth also gave evidence that a considerable part of their duties as chief cane inspectors involved ensuring that transporting schedules were adhered to.

22. The crushing capacity of each mill varies through the season however averages 175 to 200 tonnes per hour. The mills operate for 24 hours through the cane season and must be kept continuously supplied with cane. Therefore some eight canetainers per hour must be transported to each particular mill in order to ensure the necessary continuous production.

Cane physical properties and payment for crop

23. Mr Dines stated in his evidence that the cane must be processed within 16 hours of harvesting as particular bacteria - Leucanostock spp which inhabit the extraction

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process will produce molasses in the product after that time. Molasses is a less desirable and less commercially viable product than sugar. It is therefore optimal to achieve a product with a higher sugar content and lower molasses content which must be achieved by undertaking in a timely manner the steps involved in the harvest and transport of the cane.

24. Based on this sugar content (or commercial sugar content ``CCS'') the price is determined in accordance with the formula and provisions as set out in Cl 5 of the Member Agreement as follows:

``Price of sugar cane = Price of sugar [ (0.007375 × CCS) − 0.013]

where:

`price of sugar' - the weighted average price up to peak and excess sugar received by the Co-op for sugar manufactured in that season from cane grown in the State excluding any bonus, penalties or other deductions. The weighted average price being calculated on estimates of the proportion of up to quota and excess sugar for that crushing season until advance prices are notified by the Sugar Board .

`CCS' commercial cane sugar) - the weighted average for all sugar cane crushed and paid for during that season from the Member's mill areas where the weighted average CCS is calculated by the Co-op at the end of the crushing season. Until such time the weight CCS is the arithmetic average of the seasonal average of CCS over the previous five years for the Member's mill area.''

25. Payment for cane is calculated under this clause on the tonnage of sugar cane delivered by a farmer member and accepted for crushing by the Co-operative company. The price will be reduced by deductions specified for burnt cane; a weekly weighted average of extraneous matter (EM%) for each Member's produce where it exceeds 3.2% and deductions made for the maintenance of cane transport equipment owned by the Co-operative company. In any one week of the season, the delivery payment for that week is calculated according to the relation the weekly weighted average CCS of the Member's cane bears to the weekly weighted average CCS for all cane crushed from the Member's mill area.

26. Where averages and estimates are used, final adjustments and payments are made on the true figures at the end of the crushing season. Any increases in prices as determined by the Board are reflected in increased and additional payments to Members.

Transport payment

27. In accordance with Cl 3 of the Transport Agreements, the applicant was paid for each tonne of cane delivered at rates specified in each contract and subject to variation of cost factors involved.

Vehicle requirements and modifications

28. In accordance with Clause 1(a) of the Transport Contract, the applicant is required to supply at its own expense, sufficient ``bogie'' drive prime movers having a manufacturer's gross vehicle weight of at leat 22.5 tonnes, incorporating a power take-off, and capable of transmitting at least 60 kW suitable to haul semi-trailers with loads of cane. Clause (1)(b) provides that the semi-trailers will be designed for loading and unloading up to 28 tonne nominal capacity rear demountable canetainers (Ex A - RVM1 and RVM2). The loading mechanism is based on a hydraulic multi-lift system used to uplift the canetainers where the uplifting/downlifting movements are similar to that of a tipping truck as described by Mr C.

29. Mr M gave evidence that the new K100E prime movers as purchased from Kenworths required further modification by the applicant in order to be suitable for cane transport. Although the vehicles were ordered from Kenworth with specific customised requirements for their intended use as cane transport vehicles these customised requirements only related to such features as the gearbox capacity, differential and cooling systems, suspension and dust elimination apparatus. These features and other necessary modifications were made by Kenworth in order to allow the vehicles as delivered to also comply with the road registration requirements of the States in which they were used.

30. Mr Baker of Kenworth Trucks stated that the customer usually specified its requirements for a particular truck by selecting various options on a purchase order form as to horse power, suspension and transmission required. The order is then completed in consultation with an engineer who checks that the completed truck satisfies the customer's needs.

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31. A ``quick-hitch'' or ``quick-release'' system of attaching the prime mover to the trailer was provided with the K100E vehicles in its as purchased state. This system was replaced with a ``ball race'' turntable by the applicant which was stated as being more suited for cane transport because of the following factors:

  • ``• stability of the unit - quick-release would not give the same stability, especially with the type of load carrying;
  • • hydraulic system can run through the ball race turntable as the turntable has a hollow centre. Appearance and convenience of having hosing run down the middle of the vehicle;
  • • ball race assembly is lower in height than compared with quick-release, which increases stability and load volume (T9/F150).''

32. Mr C in his evidence confirmed that the advantages of the ball race system over the quick release system included greater stability, lower height and higher capacity or tonnage rating. He explained that the two parts of the turntable comprising the ball race are welded together and attached to a rocker base and base plate by the applicant. The base plate is then bolted to the chassis of the prime mover.

33. The quick-release attachments are removed and replaced with a hydraulic system in order to allow the operation of the multi-lift movement of the trailer when loading and unloading canetainers. (See diagrams - Appendix 1 and T3/F89).

34. Exhibit 1 (and T 11) comprises photos showing the process of replacement of the quick-hitch system with the hydraulic system. This includes the installation of new wiring looms, air line harnesses and hydraulic control mounting boxes in which controls are fitted in the cab of the prime mover. In order to allow the installation of the hydraulic system, the air tank must be repositioned and the original fitted fuel tank removed and replaced with an hydraulic oil tank. Hydraulic control brackets are also fitted to the upper chassis at the rear of the cab. The hydraulic oil tank is positioned on the right underside of the cab chassis and various hydraulic fittings and hoses attached to the hydraulic bracket. Hydraulic hoses are then run from the tank to the control valve. To the underside of the transmission a power take-off and hydraulic pump is fitted. An air system dryer is also installed and attached to the chassis. A duckboard to allow access to the cabin is placed over the hydraulic oil tank.

35. Mr C gave evidence that the process of conversion from quick release to ball race turntable for each vehicle takes a total of 94.2 hours. In his affidavit he itemised in detail each step in the conversion process including the painting of components and the servicing of the hydraulic and braking systems in order to render these systems operational. The ``manufacturing'' of the ball race base plate, ball race rocker plate, rocker pins, duck board, hydraulic tank, hydraulic filter bracket, control valve bracket, hydraulic hose and fittings, air line harness, air control brackets was estimated to take in total 48 hours with 10 hours being allocated to the manufacture of the hydraulic tank alone.

36. Mr C estimated the conversion from specialised articulated cane transport vehicle to interstate prime mover to take 51 hours which he also itemised as to time applicable to each of the steps involved. He estimated 3 hours was required to remove the trailer from the rocker plate and the ball race assembly. Approximately 7 hours was involved in re-fitting the fuel tank and quick release turntable and attachments. Included in the total hours conversion estimate was time taken to cancel permits, obtain insurance and certificates, inspect, register, fit number plates, registration labels and mud flaps, these steps amounting to approximately 11 hours.

37. The additional weight of the conversion parts and equipment fitted to the prime mover by the applicant was estimated at 609.5kg while the additional weight of the conversion parts and equipment fitted to the trailer was estimated at 1602kg. (Ex B).

Vehicle accounting methods

38. Mr M gave evidence and provided copies of depreciation schedules in relation to the vehicles annexed to his affidavit. The prime movers and trailers are separately listed in the schedules and discrete documentation generated in relation to each. For income tax purposes the prime mover and trailer are also treated separately. Mr M stated that generally the life span of each the prime mover and semi trailer is different and this may be in part due to the nature of the terrain. In some instances, trailers used for interstate haulage are also converted

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for cane transport use thus also affecting the lifespan of the vehicle components.

39. For the applicant company's own purposes, a fleet number is allocated to each prime mover however a separate number is allocated for the trailer to allow tracing for income taxation purposes. If a vehicle is re- converted back to a quick hitch system, it retains the same base fleet number however the particular code is changed. So that for example a prime mover used for cane transport may be allocated the number and code of 367 CC and with attached semi-trailer may be 367 CC MT. The code CC relating to cane transport can be changed if at the end of the vehicle's use as cane transport it is used for long distance haulage work.

40. Mr M stated that in July 1995 all 10 K100E vehicles were transferred to interstate haulage use as the applicant purchased new model Kenworth T400 trucks for the cane transport work.

41. For sales tax purposes, there was no dispute that the applicant was a ``registered person'' under the No 1 Act.

Submissions

42. In addressing Item 13(1) of the Schedule, the applicant submitted that the tyres and spare parts were used in the relevant period for machinery being prime movers used primarily and principally in the ``agricultural industry''. ``Agriculture'' is defined as including ``operations connected with gathering in of crops'' where a broad meaning was sought to be attributed to this phrase by distinguishing the use of the words ``gathering in'' in the legislation as opposed to ``harvesting'' to indicate that the ``gathering in'' means to collect from different areas into one mass. In this regard, the applicant relied upon the Tribunal decision in
Vicmint Partners Pty Ltd and Chief Executive Officer of Customs (1998) 48 ALD 475 a diesel fuel rebate decision concerning the interpretation of similar terminology in the Customs Act 1901. It was also submitted that the Transport Agreements also lent support to this interpretation of ``gathering'' in particularly clauses 2(a)(b) and (c), 3 and 4(g). ``Gathering in'' was said to be completed at the mill as each individual grower must operate in a co-operative which is characteristic of the sugar industry and the pricing of a grower's product is by reference to % sugar for the whole mill area (Transport Agreement Cl 5(a)(b)(c)).

43. As such, the applicant submitted that the transport operations were integral to the ``gathering'' in operations of the cane to be connected with the ``gathering in of the crop''. The Federal Court judgments in
Collector of Customs v Davis (1989) 23 FCR 378 and
Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271 were relied upon as supporting the contention that the Court considered that a narrow meaning should not be taken of the phrase ``connected with''. In Davis, it was held that the drying process of parsley was considered an integral part of its cultivation to be ``connected with'' its cultivation. That judgment concerned the interpretation of ``agriculture'' under the Customs Act 1901. Similarly in
Essential Oils Pty Ltd v Australian Customs Service (AAT 7032; 14 June 1991) and
Peter Gilbert Mackie v Collector of Customs (WA) (1993) (AAT 8819; 18/6/93) a broader view of ``connected with'' was adopted.

44. The applicant sought to distinguish the Federal Court judgment in
Prosperine Co- operative Sugar Milling Association v FC of T 96 ATC 5016 where Keifel J in determining whether a cane inspector's vehicle was used mainly in carrying out activities in the agricultural industry drew a distinction between harvesting or gathering in of the crop and the subsequent manufacture. The applicant respectfully submitted that the judgment was erroneous as it did not give any effect to the proposition that agricultural industry includes ``operations connected with the gathering in of crops'' where ``connected in'' must comprehend a broad range of activities including the production of sugar.

45. The respondent submitted that the judgment in Proserpine was directly on point as it was held in that judgment that a cane inspector's vehicle was not ``connected with'' the gathering in of crops. In this instance, the respondent submitted that the cane haulage was the preceding step in sequence to the processing by the mill, however after gathering in to be more correctly described as connected with the mill rather than the crop. Here the crop was considered to be the cane billets not sugar and the steps involved after the loading of the cane billets into the canetainer were considered to be controlled by the mill not the grower.

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46. In relation to the ``manufacture'' grounds the applicant argued that the articulated cane vehicles were commercially distinct from those prime movers produced by Kenworth and the separate semi-trailer component. Under Reg 4(1)(a)(ii) and by relying on the judgment of Drummond J in
FC of T v Brambles Holdings Ltd 94 ATC 4165, the vehicles were said to be physically, commercially and functionally distinct. Under the relevant test of ``manufacture'' the vehicles were different from the components from which they were made. The evidence was said to demonstrate that the vehicles could only be reconverted to their original state in the workshop. It was also contended that the modifications the applicant made to the K100 vehicles made them commercially different both physically and functionally and that accordingly reg 4(1)(a)(ii) was satisfied. As such the modified K100E vehicles were not road vehicles and reg 4(1)(e) was applicable. Further, they were considered exempt from sales as ``machinery''.

47. Further, the respondent submitted that the legislation did not make provision for the refund of sales tax paid as relates to the spare parts and repairs as this tax was not borne by the applicant but by the manufacturer. It was contended that the ``person'' referred to in the refund provisions of ss 19 and 20 of the No 1 Act is the person who paid the sales tax which in this instance is not the applicant. It was considered that s 26(1), 26(1A) and the interpretation of these provisions being applicable to the person liable for taxation as discussed in
Jax Tyres Pty Ltd v FC of T 84 ATC 4768; (1984) 55 ALR 723 and
Commonwealth of Australia & Anor v Precision Pools Pty Ltd & Anor 94 ATC 4727; (1994) 53 FCR 183 reinforced this contention. Likewise Reg 48 was considered as directed to persons liable to taxation and was thus directed to the last wholesaler being liable to pay sales tax. It was conceded that this argument did not however apply in relation to the purchase of the K100E vehicles as s 26(3) of the No 1 Act and Reg 12(1)(b)(ii) Sales Tax Regulations confer power on the Commissioner to make a refund.

48. As to the ``manufacture'' grounds, it was submitted in written submissions made after the hearing that the spare parts were never used in manufacture and that they were never ``eligible business goods'' under Cl 3 of the Schedule 1 as they did not satisfy the ``exclusive use within premises'' test in Cl 4 of ``the definition of `eligible primary production goods'''. Furthermore it was considered that the spare parts did not fall within any of the categories for refund specified in Regulation 58. Nor could it be argued that s 12C of the Sales Tax Procedure Act was an independent source of power to grant refunds but it was rather a mandatory limitation upon the making of refunds to taxpayers per Hill J in
Copperart Pty Ltd v FC of T 93 ATC 4779. The applicant said in repsonse, by written submission, that s 26(1) confers the necessary power to make a refund on the tax paid spare parts and tyres.

Findings

49. There was no dispute as to the facts and applicable processes involved in the harvest and transport of sugar cane by the applicant. This matter essentially comes down to one involving issues of law concerning (i) whether the conversion of the prime mover is manufacture (ii) whether the K100E prime movers (and spare parts and tyres) meet the requirements of Item 13(1) being goods used exclusively or primarily and principally in the agricultural industry or otherwise meet the exemption requirements of other Items of the First Schedule; and (iii) whether there is a power to refund the sales tax in relation to the spare parts and tyres. There is no dispute that a refund is applicable to the prime movers should they be found to be manufactured goods which are exempt under the Exemptions Act.

50. Section 5 of the Exemptions Act exempts from tax the sale values of any goods ``covered by any item or sub-item in the first column of the First Schedule under any Act specified in the second column of that Schedule opposite that item or sub-item''. Various items refer back to the particular Assessment Act to which they relate. In this instance the No 1 Act is applicable and provides in s 19 that sales tax shall be paid by the manufacturer of goods manufactured in Australia and under subparagraph (i) applied by the manufacturer to his own use. Section 17(1)-17(3) provides:

``17(1) Subject to, and in accordance with, the provisions of this Act, the sales tax imposed by the Sales Tax Act (No. 1) 1930 shall be levied and paid upon the sale value of goods manufactured in Australia by a taxpayer and sold by him or treated by him as stock for sale by retail or applied to his own use.

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17(1A) The reference in subsection (1) to goods manufactured in Australia by a taxpayer and applied to the taxpayer's own use does not include a reference to goods that would be taken to be manufactured in Australia by the taxpayer by reasons only of paragraph (e) of the definition of `Manufacture' in subsection 3(1) and applied by the taxpayer to the taxpayer's own use.

17(2) Subject to subsection (1A), the reference in sub-section (1) to goods manufactured in Australia by a taxpayer and applied to his own use shall be read as a reference-

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

17(3) For the purposes of paragraph 2(b) where-

  • (a) goods (in this subsection referred to as the `relevant goods' have been manufactured in Australia by a manufacturer, otherwise than in the course of carrying on a business;
  • (b) the manufacture of the relevant goods commenced after 16 November 1978;
  • (c) the manufacture of the relevant goods was carried out in whole or in part on premises made available to the manufacturer, under an agreement entered into after 16 November 1978, for the purpose of, or for purposes which included the purpose of, manufacturing the relevant goods;
  • (d) the premises so made available to the manufacturer were premises ordinarily used by a person in the course of carrying on a business in the ordinary course of the carrying on of which goods identical in all material respects with the relevant goods could reasonably be expected to be manufactured; and
  • (e) the whole, or the principal part, of the labour used in the manufacture of the relevant goods was provided by persons who provided their labour otherwise than voluntarily and without remuneration,

the relevant goods are goods manufactured in Australia by the manufacturer as provided in this subsection.''

52. Section 20 however provides:

``20 Exemptions

Notwithstanding anything contained in section 19, sales tax shall not be payable under this Act by the person specified in that section upon the sale value of goods the sale value of which is, by virtue of the Sales Tax (Exemptions and Classifications) Act 1935-1973, exempt from sales tax under this Act.''

It is therefore appropriate to firstly consider the issue of manufacture with respect to the articulated cane transport vehicles (and spare parts and tyres) and if so whether there is any Item in the First Schedule which applies to exempt the applicant from sales tax with respect to the K100E prime movers and spare parts and tyres.

53. The issue of refund is as contended by the respondent with respect to the spare parts and tyres must only be considered if any exemption item applies with respect to the spare parts and tyres.

Manufacture

54. ``Manufacture'' is defined in s 3(1) of the No 1 Act:

```Manufacture' includes-

  • (a) production;
  • (b) the combination of parts or ingredients whereby an article or substance is formed which is commercially distinct from those parts or ingredients, except such combination... as, in the opinion of the Commissioner, it is customary or reasonably practicable for users or consumers of those articles or substances to undertake;...''

55. The definition is merely inclusive and does not specifically define its meaning. Lockhart J noted in
FC of T v Jax Tyres Pty Limited 85 ATC 4001 that:

``... When the word `includes' is used in a definition section it is generally used to

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enlarge the meaning of the word it defines. So far as its meaning is not defined in the relevant statute it must be given its ordinary meaning.''

(at p 4004)

56. Drummond J in adopting this view in
FC of T v Brambles Holdings Ltd 94 ATC 4165 at 4168 said:

``... In applying the word `manufacture' in the sense it bears in ordinary English speech to the facts of the particular case in order to determine whether goods are assessable to sales tax, it has long been accepted that one is required to ask whether that which is made is a different thing from that out of which it is made.''

57. This dictum was stated by Darling J in
McNicol v Pinch [1906] 2 KB 352 at 361 as the essence of manufacturing to be ``what is made shall be a different thing from that out of which it is made.''

58. The dictum of Darling J was quoted and enlarged by Lockhart J in the Jax Tyres case (supra) where his Honour stated; ``To manufacture an article necessarily involves producing a different article from the articles, materials or ingredients from which it was made.'' (at p 4004)

59. In
Commonwealth of Aust & Anor v Genex Corp Pty Ltd & Ors 92 ATC 4764 the Full High Court noted that ``It has long been accepted that one is required to ask whether what which is made is `a different thing' from that out of which it is made.'' (at p 4768)

60. Windeyer J in the
M.P. Metals Pty Limited v FC of T (1968) 14 ATD 407 at 411; (1967-1968) 117 CLR 631 at 638 considered what was a different thing with respect to the meaning of ``manufacture'' under the Act:

``... But what is a different thing?... Identity and difference as concepts must always be related to some quality of the thing or things in respect of which identity or difference is to be determined. It may be colour, shape, chemical composition or any other quality. To speak of `substantial differences', as distinct from small differences, means little or nothing unless some quality of the thing is postulated as its essential. And whether a thing is so different a thing from the thing or things out of which it was made as to be properly described as a new commodity may depend not only upon physical characteristics but also on differences in its utility for some purpose.''

61. In this case, the applicant purchased new prime movers with the intention of using such prime movers for cane transport by modifying them for the attachment of specialised semi trailers by way of a ball race turntable and other modifications as discussed and accepted from the evidence. This complete modification process occurred in the applicant's workshop and involved a considerable number of man hours in undertaking such works. In the process, an hydraulic system was fitted as were cab controls for the semi-trailer and a two way radio communications system in accordance with the provisions of the Transport Agreement. The modification process is such that the integrated vehicle comprising the prime mover and trailer became a new functionally distinct vehicle from its component parts. In order to disassemble the unit, the evidence was that it must be taken back to the workshop and re- converted back to a prime mover from which all parts and equipment are removed. While this process is considerably less time consuming than the assembly process, this can have little bearing on the test to be applied as to manufacture, this in effect being the manufacture reverse process.

62. The prime mover and trailer alone are not capable of carrying out the functions of a fully operational articulated cane transport vehicle nor can be they be separately considered to be a cane transport vehicle. As a result the combined vehicle was a new and distinct entity different in function and physical characteristics from its component parts. I take official notice that a prime mover is merely a powering vehicle specifically designed for the attachment of a trailer which of its nature cannot have its own motive power for propulsion. A semi-trailer is designed for the carriage of bulk goods sometimes with a means of loading and unloading such goods, combined with a prime mover it forms a functional unit for cane transport operations.

63. While the accounting methods used by the applicant was one in which the component prime mover and semi-trailer were accounted for separately for costing and depreciation purposes, this can hardly be determinative of the issue of whether the resultant article is different to its component parts and thus whether the assembly process constituted

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``manufacture''. Accounting methods alone can only be of limited assistance in this determination and as considered by Drummond J in Brambles at 4169 could only be of ``marginal relevance''.

64. In FC of T v Brambles Holdings Ltd 94 ATC 4165 the Court considered that the Tribunal did not err in finding that the attachment of a new body to a new chassis involved the creation of a new garbage truck and therefore amounted to a manufacture of goods. However where a used garbage truck body owned by the applicant was attached to a new chassis, it was open to the Tribunal to find that there was no manufacture as the applicant in that case had started with a garbage truck and ended up with a renovated garbage truck. But where a second hand body not previously owned by the applicant was attached to a new chassis this was considered to be manufacture as the applicant had not started with a garbage truck but a component body and finished with a complete truck.

65. Therefore, on the evidence before me and for the reasons stated, I consider that the modifications made by the applicant to the prime movers and the attachment of the semi- trailers amounted to the manufacture of an articulated cane transport vehicle. The applicant is therefore a manufacturer.

Whether machinery and whether used in the agricultural industry - Item 13(1)

66. Item 13(1) of the First Schedule to the Exemption Act applies to machinery, implements and apparatus (and parts therefor) for use in the agricultural industry if they are goods of a kind used exclusively or primarily and principally in that industry.

67. There is no dispute as to the eligibility for exemption of the trailers. Under Item 13(1) the issue arises as to whether the prime movers and spare parts and tyres are exempt from sales tax.

68. Item 13(1) requires that the machinery, implements or apparatus (and parts therefor) be for use in the ``agricultural industry'' and that they be goods of such a kind that are used exclusively, or primarily and principally in that industry.

69. In order to satisfy this Item, the prime mover must fall within the first element to be satisfied, that is whether it is ``machinery, implement or apparatus''. The applicant submitted that the prime movers were ``machinery'' as Item 1(d) of the Fourth Schedule provides that it applies to motor vehicles including prime movers and semi- trailers but does not include motor vehicles to which item 13(1) applies. The respondent did not challenge this assertion and while it may not be necessary to making any finding in this regard in view of the following findings as to the next element of item 13(1) to be satisfied, that is whether the prime movers were used in the ``agricultural industry'', I will proceed on the basis that they are ``machinery'' albeit that the meaning of this word is not defined in the Exemptions Act.

70. Both the applicant and the respondent sought to define the phrase ``agricultural industry'' by reference to the definition of ``agriculture'' in Clause 1 of the First Schedule to the Exemptions Act. ``Agricultural industry'' is not defined in the legislation however ``agriculture'' is defined as including ``other operations connected with the gathering in of the crops''. Both parties sought to highlight the similarities between this definition and that under s 164(7) of the Customs Act 1901 as applies to diesel fuel rebate which provides:

```agriculture' means:

  • (a)...
  • (b) the cultivation or gathering in of crops; or
  • (c)...
  • (d)...

and includes:

  • (e)...
  • (f)...

other operations (including operations by way of pest or disease control or by way of soil or water conservation) connected with any operations referred to in paragraphs (a), (b), (c), (d) or (e);

...''

71. This definition was amended by the Customs and Excise Amendment Act 1995 (No 87 of 1995).

72. The so-called ``sweeper'' clauses in the Customs Act 1901 being those ``other operations... connected with any operations referred to in paragraph (a), (b), (d), (d) or (e)'' were removed by the amending legislation in part due to the uncertainty created and the broad interpretation adopted by the Courts.

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73. The somewhat analogous broad definition of ``agriculture'' however remains in s 3 of the Exemptions Act. Both parties referred therefore to diesel fuel rebate decisions and judgments which have considered this definition and the phrases ``connected with...'' and ``gathering in of the crops'' under the Customs Act 1901. Reference was made by both parties to the diesel fuel rebate cases as providing assistance to the interpretation of the phrase ``connected with... gathering in of crops''. It should of course be recognised that while similar definitions arise in the Exemptions Act and the Customs Act 1901 the provisions and definitions are not identical. Nor can the intent or purpose of both pieces of legislation be said to be the same. In any event in relation to the issue of whether the transport operations are ``connected with the gathering in of the crop'' will arise as a question of fact. Accordingly, the diesel rebate fuel cases provide little assistance in making the factual determination.

74. These arguments also perhaps ignore the difficulty arising in that the composite phrase ``agricultural industry'' is specifically referred to in Item 13(1) rather than the word ``agriculture''. It does not necessarily follow that ``agricultural industry'' has the same meaning as ``agriculture'' as if the intention was to be so then the legislation would have been expressed as ``machinery etc for use in agriculture''. The phrase may well indicate that it means the ``industry of agriculture'' where ``agriculture'' is defined in the Act. That definition is stated as including specific activities and then more generally such other operations not included in those specific ones stated. It would follow then that the goods must be used in the industry or other operations connected with the gathering of crops. The next issue that then arises is what is the ``crop''.

75. The parties are opposed on this issue with the respondent submitting that the crop is the sugar cane as harvested whereas the applicant has submitted that the crop is the sugar. There has been no evidence provided to the Tribunal as to what constitutes the crop or what may be considered to be the accepted industry understanding as to what the crop comprises. As noted by the High Court in
Collector of Customs v. Agfa-Gevaert Limited 96 ATC 5240 at 5246; (1996) 141 ALR 59 at 66:

``The courts have also said that it may be less difficult to establish a trade meaning which extends the ordinary meaning of an expression than one which limits the ordinary meaning in a specialised way. However, 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.''

76. Although there is a limited evidence on this point to assist me, I find that the crop consists of sugar cane whereas the sugar product itself is a processed and extracted by- product of the crop. In all respects the Transport Agreements refer to the transport of cane. Furthermore in clause 2(a)(i) of the Member Agreement, specific reference is made to the ``crop of sugar cane'' in the context of harvesting arrangements by member farmers. The agreement then provides for the farmer to delivery the cane to delivery pads and to be placed in canetainers owned by the Co-op. The cane is purchased by the Co-op and under agreement only with the Co-op (not the member farmers in their own capacity), the applicant collects and transports that cane. There is thus a clear contractual distinction between the delivery of the crop to a central collection area of the pads as once delivered to the pads, the transport agreement then takes effect. It is at this point that the balance tips as the crop ceases to be gathered in and is accepted by the purchaser Co-op (albeit subject to a right of refusal under Cl 4 of the Member Agreement) being an entity who's operations are concerned with milling and production of sugar being distinct from the growing and harvesting of a crop. It is immediately prior to the Transport Agreement taking effect that the crop has been gathered into one mass as discussed in Vicmint. While there may be a right of refusal vesting in the Co-op the evidence was that in practice this right had not been invoked during the period of employment of the relevant Chief Cane Inspectors. Regardless of this fact I am satisfied that this right of refusal is a commercially prudent contractual right which does not affect the fact that the crop ceases to be gathered in when it is collected into one mass - that is at the delivery pads prior to the coming into effect of the Transport Agreements. In the Full Federal Court judgment in
Collector of Customs v Pozzolanic (1993) 43 FCR 280 at 291 considering a diesel fuel rebate matter, the Court upheld the Tribunal's finding that the

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unloading of stock feed from the truck to storage silos was not an operation ``connected with'' the rearing of live stock and was thus ``part of the process of manufacture, distribution, haulage and delivery of stock feed''. By analogy, the transport of cane to the mill cannot be an operation ``connected with'' the gathering in of crops but is rather a contractual transport operation co-ordinated by the Co-op.

77. Even if this approach is not correct, Item 13(1) further requires that the goods are of kind used exclusively or primarily and principally in the agricultural industry. I find it difficult to accept that a prime mover, albeit modified, and having a specific two way radio system installed could be seen to be used exclusively or primarily and principally in the agricultural industry. The prime mover by its very nature is used in the transportation industry as opposed to the agricultural industry. The applicant operates as a transport company engaging in interstate haulage transport work as well as contracted transport work with respect to cane and corn. Likewise the integrated unit of the prime mover with trailer attached is a transport industry vehicle the character of which is not dictated by the nature of the product it transports. This view is supported by the provisions of the Transport Agreements. For instance in the Agreement dated 1 June 1992, the recitals provide that the applicant is engaged to carry out road haulage duties and further provides in Cl 5(a) that the applicant warrants itself to be an independent contractor carrying on business on its own behalf as a road haulier. The full Court in
Collector of Customs v Pozzolanic (1993) 43 FCR 280 also drew a distinction between haulage operations and those other operations as arose under the facts of that matter. The goods cannot therefore be seen to be used exclusively or primarily and principally in the agricultural industry.

78. I therefore find that Item 13(1) is not applicable in this case. As the prime movers do not fall within the ambit of this or any other sales tax exemption, are not exempt goods so that sales tax is applicable. It follows that the spare parts and tyres used on the vehicles be it the prime mover or articulated cane vehicle for the same reasons cannot fall within the ambit of being implements or apparatus for use in the agriculture industry.

Aids to manufacture - prime movers and spare parts/tyres

79. Item 113C of Schedule 1 provides for exemption as follows:

``113C Goods applied by a registered person to his own use as aids to manufacture (as defined by regulations made under the Sales Tax Assessment Acts) or as auxiliaries to aids to manufacture (as so defined)''

80. The applicant contended that this item applies to the prime movers as aids to the manufacture of specialised articulated cane transport vehicles, were not ``road vehicles of the kinds ordinarily used for the transport of persons or the delivery of goods'' within Reg 4(1)(e) because each prime mover was not a vehicle of a kind ordinarily used for the transport of goods. It was contended that the focus of the exclusion in Reg 4(1)(e) was upon the ordinary use of the actual vehicles as they were before being subject to the process and was not concerned with the use the vehicle is designed for or its potential use.

81. Reg 4(1) of the Regulations defines ``aids to manufacture'' to be:

``goods for use by a registered person in the course of carrying on a business (where that use is exclusively, or primarily and principally, for the purposes of that business), being:

  • (a) machinery, implements and apparatus for use exclusively, or primarily and principally:
    • (i) in the actual processing or treatment of goods to be used in, wrought into or attached to goods to be manufactured;
    • ...

but does not include the following goods,...

(e) road vehicles of the kinds ordinarily used for the transport of persons or the transport or delivery of goods;''

82. The question is therefore whether the prime movers are machinery for use exclusively or principally or primarily in the processing, treatment or attachment to goods to be manufactured.

83. Under the Sales Tax Assessment Act (No 1) 1930 sec 3(1) ``goods'' is defined as:

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```Goods' includes commodities, but does not include-

  • (a) goods which have, either through a process of retailing or otherwise, gone into use or consumption in Australia; or
  • (b) goods which are sold as second-hand goods and are manufactured exclusively or principally from goods which-
    • (i) have, whether alone or as parts of other goods, gone into use or consumption in Australia; and
    • (ii) in the opinion of the Commissioner, in their condition as parts of the goods so manufactured, retain their character as goods or parts of goods which have gone into use or consumption in Australia.

For the purposes of this definition a container, which is used for the first time in Australia in the marketing or delivery of goods, shall not, by reason of that use, be deemed to have gone into use or consumption in Australia until the goods for the marketing or delivery of which the container has been so used have been removed therefrom for use, sale or other disposition separately from the container;''

84. Subparagraph (e) clearly excludes road vehicles ordinarily used for transport of persons or delivery of goods. The applicant contends that this subparagraph should be construed narrowly as in context, it provides for goods ``for use'' not ``to be used'' in the transport of persons or delivery of goods. In this case it is contended that the focus in Reg 4(1)(e) is upon the ordinary use of the actual vehicle as it is before it is subject to the process of manufacture. From the evidence, the prime movers are manufactured by Kenworths and delivered in such a state to the applicant so as to comply with the road registration requirements of the relevant States in which they will be used. They are thus at that point vehicles registrable for public road use and based on this ordinary meaning are ``road vehicles''. However the exclusion clause is also qualified by the requirements that they be road vehicles ``ordinarily used for the transport of persons or delivery of goods''. While the applicant contends that the prime movers in the ``pre'' manufactured state are not so classified because as I understand the submission they do not have a semi-trailer attached and therefore cannot at that time be used for transport or delivery purposes, the prime mover of itself is still capable of transporting persons and delivering goods albeit obviously not the quantity possible if a semi-trailer was attached. The difficulty that I consider arises in determining whether the exclusion applies, is with the use of the word ``ordinarily'' in this phrase.

85. A prime mover as defined under Reg 2 of the Interstate Road Transport Regulations is ``a rigid motor vehicle designed to haul a semi- trailer''. Similarly for example under the Transport Infrastructure (Roads) Regulation 1991 (Qld) it is defined as ``a motor vehicle designed to haul a semi-trailer''. So that its use is for hauling a semi-trailer whereas an articulated vehicle comprising both semi trailer and prime mover clearly can be ordinarily used to deliver goods because of the attachment of the semi trailer in which the goods are transported for delivery. A prime mover of itself can only haul the trailer which in effect transports the goods for delivery, in itself a prime mover is not ``ordinarily'' used to deliver goods as it has limited capacity to do so if it is not part of an articulated vehicle. However, a prime mover may be seen to be used for ``ordinarily'' transporting persons such as the driver. While it may not be ``primarily'' used for this purpose, it never the less has this use. Accordingly the exclusion in subparagraph (e) must apply so that the prime movers are not aids to manufacture. The exclusions as apply with respect to ``aids to manufacture'' also apply under the definition of ``auxiliaries to aids to manufacture'' in Reg 4 which is defined as follows:

```auxiliaries to aids to manufacture' means goods for use by a registered person exclusively, or primarily and principally:

  • (a) in the processing or treatment of goods for use by him as aids to manufacture;
  • ...

but does not include goods which are of any of the kinds expressly excluded form the definition of aids to manufacture;''

86. Therefore, the prime movers do not qualify as ``auxiliaries to aids to manufacture'' by virtue of the exclusion under paragraph (e) of the definition of ``aids to manufacture''. Nor does any other exemption item apply with respect to the prime movers.

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87. In relation to the spare parts and tyres, the same exclusion argument cannot apply. The spare parts used as components in the manufacture of the articulated vehicles as described and accepted from the evidence clearly fall within the provisions of Reg 4(1)(a) as apparatus or implements to be wrought into or attached to goods to be manufactured. It is not clear from the evidence or documents as to what the spare parts and tyres included in the claim are but the provisions will only relate to those parts used in the manufacture process. From the evidence, the parts described and depicted in the conversion process do not include tyres. Only those parts attached to the prime mover such as the hydraulic system, controls and other such parts as described can prime facie come within the definition of ``aids to manufacture''. Evidence was adduced that parts used in the conversion process were at the end of the life of the articulated cane transport vehicle removed and some re-used in the manufacture conversion process of other vehicles. While the applicant held a certification as a registered person, there was no evidence that this certificate was quoted in the purchase of those parts used in the manufacture process.

88. In any event these parts were parts for road vehicles. Under Reg 4(1)(m) parts for any goods expressly excluded from the definition are also excluded. As discussed road vehicles are expressly excluded from the definition under reg 4(1)(e). Therefore parts used for the manufacture of the articulated cane transport vehicles are also excluded as aids to manufacture and Item 113E is not applicable as a grounds of exemption. Nor are any other applicable exemption grounds in relation to the prime movers or spare parts and tyres.

Conclusion

89. As a result it is not necessary to consider the refund issue under either s 12C of the Sales Tax Procedure Act 1934 or the No 1 Act nor any of the other arguments as raised by the parties in submissions.

90. I find that the applicant is not entitled to a refund of sales tax in relation to the prime movers and spare parts and tyres as neither exemption Items 13(1) or 113E apply to the goods in question.

91. The objection decisions under review will be affirmed.

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