T J Depiazzi and Sons v Collector of Customs No. W92/114 AAT No. 8770

Case [1993] AATA 8770
17 AAR 557

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(Decision by: P.W. JOHNSTON, K.J. TAYLOR and R.D. FAYLE)

T J Depiazzi and Sons
v Collector of Customs No. W92/114 AAT No. 8770

Tribunal:

Member:
P.W. JOHNSTON (Deputy President), K.J. TAYLOR (Member) and R.D. FAYLE(Member)

Hearing date: 20 November 1992
Decision date: 11 June 1993.

Perth

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Decision by:
P.W. JOHNSTON, K.J. TAYLOR and R.D. FAYLE

This is an application to review a decision of the Collector of Customs refusing to grant statutory rebate of duty paid in respect of diesel fuel purchased by the applicants, a partnership, who claim that the fuel was used in "primary production" as defined in s.164 of the Customs Act 1901 ("the Act"). In that case, they claim to be entitled to rebate.

2. At the hearing the Tribunal took into evidence the documents provided to it under s.37 of the Administrative Appeals Tribunal Act 1975 (exhibit 1), 6 photographs of the applicant's machines used in the operations giving rise to the rebate claim and of the resulting product (exhibit 2), and samples of the raw materials processed by the machines (exhibit 3). The Tribunal was also provided with a Statement of Agreed Facts.

3. Mr G Brysland, solicitor, appeared for the applicants and the respondent was represented by Mr K Corke, a departmental advocate.

4. There is no dispute as to the basic facts. They may be stated briefly as follows.

5. The applicants conduct mixed-farming and other operations at a property near Dardanup in Western Australia. These operations include the processing of raw material consisting predominantly of bark but also includes wood pieces and fragments received from local saw mills located at Dardanup, Worsley and Yarloop. These materials come from karri, marri, jarrah and pine trees, each of which specie is suitable for building or carpentry purposes.

6. The materials are processed by either of the two machines, which the Tribunal will designate as A and B, which are powered by engines run on diesel fuel. Machine A is fixed to brick, steel and concrete foundations and sits under a small roof of flat sheets. Machine B, known as a Farmhand Tub Grinder, consists basically of a cylindrical bin with rotating hammers inside. It is on wheels and can be moved behind a tractor in order to operate it at different sites on the property. Front end loaders, which also run on diesel fuel, are used to supply the raw material to each of the two machines.

7. The function of both the machines is to break the raw waste materials obtained from the saw mills into smaller pieces by the action of hammers which operate by rotary motion. A proportion of the processed material is then blended with sand, sawdust, lime and fertiliser in a separate operation using front end loaders to produce potting mix which is sold to an unrelated company ("Hortico"). The unmixed remainder is sold direct to horticulturists and horticultural distributors including, so the Tribunal was informed, nurseries. The blending of pottery mix for sale to Hortico is carried out on a concrete pad by front end loaders which use diesel fuel. All processed material is produced exclusively for use in horticultural operations.

8. The diesel fuel usage is:

Legislation

9. The relevant statutory provision applicable is s.164 of the Act which, so far as relevant, reads:

Rebate of duty in respect of diesel fuel used for certain purposes

"164.(1) A rebate is, subject to subsection (2) and (3) and to such conditions and restrictions as are prescribed (being conditions and restrictions that relate to goods generally, to goods included in a class of goods that includes diesel fuel or to diesel fuel or to diesel fuel only), payable to a person who purchases diesel fuel use by him:

...

(aa) in primary production (otherwise than for the purpose of propelling a road vehicle on a public road);

...

10. In subsections (7) of s.164, "primary production" is defined to mean:

"(a)

agriculture;

(b)

fishing operations; or

(c)

forestry."

11. The following definitions are also provided in that subsection:

"agriculture" means:

(a)

the cultivation of the soil;

(b)

the cultivation or gathering in of crops; or

(c)

the rearing of live-stock;

and includes:

(d)

viticulture, horticulture, pasturage or apiculture;

(e)

hunting or trapping carried on the purpose of a business; or

(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 paragraph (a), (b), (c) (d) or (e); but does not include fishing operations or forestry:

...

"forestry" means:

(a)

the planting or tending, in a forest or plantation, of trees intended for felling; or

(b)

the thinning or felling, in a forest or plantation, of standing timber;

and includes:

(c)

the transporting, milling or processing, in a forest or plantation, of timber felled in the forest of plantation;

(d)

the milling of timber at a saw mill or chip mill that is not situated in the forest of plantation in which the timber was felled;

(e)

where timber is milled at a saw mill or chip mill that is not situated in the forest or plantation in which the timber was felled - the transporting of the timber from the forest or plantation in which it was felled to the saw mill or chip mill; or

"Horticulture" includes:

(a)

the cultivation or gathering in of fruit, vegetables, herbs, edible fungi, nuts, flowers, trees, shrubs or plants;

(b)

the propagation of trees, shrubs or plants; or

(c)

the production seeds, bulbs, corms tubers or rhizomes;

..."

Contentions of Parties

12. The applicants claim that the diesel fuel in respect of which rebate is sought was used by them in "primary production". More specifically, it is said to be used, depending on which process in the above operations it relates to, in either "forestry" or "agriculture" within the meaning of those items in s.164. The Tribunal will consider each category separately.

(a) Forestry Submissions

13. The applicants contend that the processing of raw materials by Machines A and B, constituting 65 per cent of diesel fuel usage in respect of which rebate is claimed, is eligible for rebate under paragraph (d) of the definition of "forestry" in s.164(1). This is on the basis that the raw material, ie the small wood fragments and bark processed by the applicants, is "timber" since it derives from trees that are fit to be used for building or carpentry purposes. "Timber" in paragraph (b), so they argue, includes all the living parts of the trees including the wood, bark and branches besides the main trunk. The separation of the bark from the trunk in the course of an initial "milling of timber" does not mean the bark and other small fragments lose the character of timber.

14. If it be accepted that the raw material for processing in the machine is "timber" it is then asserted that each of the machines A and B is a "chip mill" used in the course of "forestry" (see paragraph (d) of the definition of "forestry" in s.164(7) above). This is because each is a "mill", namely "a machine which does its work by rotary motion" (Macquarie Dictionary at 1106). The process of reduction of the raw materials by means of the rotary hammers used in the machines is itself a process of "milling". The main and only purpose for using machines A and B is to carry out the chipping of raw material. It does not matter that the wood and bark that is processed do not result in a product suitable for using in houses and carpentry. The latter end-use is not an essential defining characteristic of "timber".

15. Further, the machines do not cease to be chip mills either because they are not housed in a building solely devoted to the milling of timber, or, in the case of machine B, because it is capable of being moved. Transportability of the machinery does not affect its status as a mill. If, nevertheless, there is a requirement that the chip mill be housed in a discreet building, machine A satisfies that requirement anyway since it is fixed to brick, steel and concrete foundation and is covered by a permanent canopy.

16. The respondent denies that any of the diesel fuel is used in "forestry" operations. It puts the threshold objection that the bark processed by the machines cannot be regarded as "timber". Words like "timber" when used in s.164 are to be given their ordinary English meaning (Re Wesfi and The Collector of Customs (1984) 7 ALN 8 at 9) thus the dictionary meaning of "timber" as meaning "wood capable for use in building or structural purposes" (Macquarie Dictionary p 1775), should be adopted.

17. Bark, so Mr Corke submits, is not "timber". This is evident if regard is had to the other uses of the word "timber" throughout the definition of "forestry". It is to be presumed that the word has a constant meaning throughout the statutory provision. Wherever the word "timber" appears it should be taken to refer to something which has been, or is capable of being, "felled". Bark, being the external covering of the wood, and being distinct and separate from but attached to the wood, cannot be considered to fall within the usual meaning of "timber", particularly once it has already been removed from the parent tree.

18. The respondent further contends that neither of the machines operated by the applicants is a "chip mill". In this respect it is said that because paragraph (d) of the definition of "forestry operations" requires that milling take place "at a...chip mill", the milling must therefore occur at a discreet building capable of being identified as a chip mill. The respondent draws support for this proposition from the decision of the Tribunal in Re Brymay Forests Pty Ltd and The Collector of Customs (1985) 9 ALN 176. Detracting also from their having the character of "chip mills" is the fact that machines A and B operate in a field located in a mixed farm. Furthermore, machine B, which is mobile, operates at a distance from any building.

19. The reduction of the bark and wood fragments to mulch, according to the respondent, is itself a further step removed from the original processing of the tree, and should be seen as a process of secondary manufacture rather than primary production.

Do the Applicants use Diesel Fuel in "Forestry"?

20. In approaching the issues, the Tribunal has adopted a generous approach to interpretation of the relevant term given the beneficial nature of the legislation (see The Collector of Customs v Cliffs Robe River (1985) 7 FCR 271, at 275).

21. As the Tribunal sees it, there are three relevant questions to be determined in deciding whether diesel fuel used in relation to the production of the mulching material, performed by machines A and B, is used by the applicants in "forestry" and hence "primary production". These are:

(1)

Whether the raw material consisting of wood fragments and bark is "timber";

(2)

Whether the operations performed by the two machines constitutes " milling";

(3)

If so, whether that milling occurs "at a chip mill".

22. According to subsection (7) of s.164, the two primary meanings of "forestry" relate to the cultivation or maintenance of "trees intended for felling" (paragraph (a)) and the cutting down and harvesting of "standing timber" (paragraph (b)). The Tribunal agrees that expressions such as "trees" and "timber" should be given their ordinary meaning. It is also apparent that given the different meanings that can be given to those expressions, the Tribunal should employ the one that makes most sense in the statutory context. In paragraph (a) of the definition of "forestry", "trees" can only mean the total plant comprising trunk, branches, leaves and bark. In paragraph (b) the reference to "standing timber" must again refer to trees in their entirety prior to being felled. There is no warrant, at that stage for limiting "timber" to any particular component of the tree, or for that matter, excluding any part of the tree from the notion of "timber". The Tribunal accepts, however, that "timber" in the statutory context of s.164 carries with it a sense of purpose; namely it embraces trees and constituent parts of trees which are intended for further processing and consumption. Given the reference later to processing at a "chip mill" in paragraph (d), the Tribunal sees no reason to limit the ultimate uses of the material derived from trees to those related to structural building or carpentry. Processing to produce other derivatives such as paper or chipboard would also be included in the range of uses to which such timber could be put. Whether it also includes the production of mulch is, of course, the principal issue before the Tribunal under this heading of "forestry".

23. Paragraph (d) of the definition of "forestry", is an extension of the primary meanings given in paragraphs (a) and (b). There is no indication on the face of the extension to limit the meaning of "timber" to any single part of the tree. The respondent maintains that at the stage of milling it is only the primary processing of the trees themselves, and possibly, if already de-barked, only the trunks, that amounts to milling of "timber". This includes only the milling and chipping of the basic logs or sawn parts. On this argument the processes employed to remove branches and bark would not be milling. The Tribunal accepts this proposition but only where the branches and bark are removed away from the timber mill. If those branches and bark are subject to a separate milling process at a mill, however, that would be the milling of timber.

24. As the Tribunal sees the matter, any element of the material that originally was a constituent of a tree that has been felled is capable of fitting the notion of "timber" within paragraph (d) throughout the course of events when it is subject to a process of further reduction in size and shape up to the point where the basic constituent material, in reduced or separated form, is subjected to a secondary process or treatment. So far as saw milling is concerned it is not just the original sawing of a trunk into a basic square or rectangular logs that exhausts that description. Further sawing of logs into smaller planks would also come within the description of saw milling. This would be so even if the further reduction in size occurs at a different and possibly specialised saw mill. That a second processing occurs does not necessarily disqualify that process as too remote from the family of forestry-related processes that have been seen by Parliament to merit assistance because of their association with primary production. Once, however, the basic planks are subject to processes or operations that would shape them for use in houses or carpentry, the milling process would come to an end. Thus application of a splinting process to make matches falls outside "forestry" (Brymay).

25. By analogy with saw milling into smaller logs or planks the Tribunal regards the material used in the two machines as still coming within the genus of timber. It is material derived from the basic tree though already subjected to a process of separation, severance, destruction and stripping. Though in waste form, it is still capable of further reduction in size and constituency and, at that point in time, has not lost the character of being a constituent of a tree that itself falls within the generic class of "timber". Its form may have changed but its nature and condition as substance that is derived from the constituents of a felled tree has not.

26. In this respect the Tribunal does not see any significance in the proportion of wood fragments or bark in the raw materials supplied to the machines. It is all a form of timber derived from felled trees.

27. Turning to the nature of the operations performed by machines A and B, the Tribunal accepts the description of "milling" and "mill" adopted by the Tribunal in the Wesfi case. There the Tribunal said: "we accept that each of the subject premises constitutes a mill. The word "mill" is a word of wide meaning. It is not necessary that we attempt to define it. The Shorter Oxford English Dictionary gives the following relevant meaning.

"4. A building or works fitted with machinery in which a (specific) manufacture is carried on (cotton-, silk-, silver-m., etc.)."

We have no doubt that the premises would be appropriately described in ordinary language as mills and indeed that would be the most appropriate description of them.

The Shorter Oxford English Dictionary gives this relevant meaning of "milling":

"1. The action or process of subjecting something to the operation of a mill, as corn, etc. b. The treatment of a substance or material in any kind of mill; e.g. The operation of fulling cloth, rolling metals, crushing minerals, etc.".

In relation to machinery, the word "mill" is a word or wide meaning. It is not practicable to attempt a definition which definitively states its meaning by reference to specified criteria. However, the Shorter Oxford English Dictionary gives this relevant meaning:

"5. A machine which does its work by rotary motion, esp. a lapidary's mill. The machinery which, in the subject plant, shapes the timber is rotary actioned. Rotary saws are traditionally accepted as machines which mill timber. The appropriate rotary knife flake mills are called mills and, in our view, carry on a process of milling within the ordinary concept of that word. Similarly, the intermediary fines mill and the final fines mill operate by rotary action and carry on a process of milling within the ordinary concept of that term. We therefore accept that the applicant engages in milling at its subject plants."

It will be noted that the Tribunal there did not state that further processes of reduction should be excepted from the concept of milling.

28. Given that the two machines operate by a process of rotary hammers which break up the raw material into further refined and shredded particles, the Tribunal finds that the machines are engaged in "milling".

29. It then remains to be determined whether the machines are, in themselves "chip mills". Associated with this is the question of whether the milling occurs "at a chip mill". It is not necessary, as the Tribunal sees its, that to be a mill, the operation need be of a certain size or take a particular standard form. A machine which mills must be a mill. There is no statutory prescription in the s.164(7) definition of "forestry" which requires milling to take place in a building. It is not that specific. A mill can be either fixed and housed in a building or it can be moveable, designed to function at different locations. The latter is nonetheless a mill. The emphasis is on function rather than the environment in which the function occurs. The processes of saw milling and chip milling are capable of technological advance and adaptation and what might be classically regarded as a saw mill or chip mill at one point of time may be overtaken by an operation employing a more advanced method of processing at a later time.

30. To be a "chip mill", in the opinion of the Tribunal, it need only be a mill at which "chipping" of timber or parts of timber occurs. Certainly so far as machine A is concerned, given its permanent location and the nature of its operation the Tribunal finds that it is capable of, and does in fact, meet the description of "chip mill". The fact that only a portion of the raw material is actually wood fragments does not, in the opinion of the Tribunal, affect this conclusion. If it is a mill which engages in a process of milling involving a substantial though not necessarily predominant, proportion of chipping, it is a chip mill.

31. "Chip" itself is broadly defined in Dictionaries. According to the Macquarie Dictionary, relevantly it means:

"1. a small piece, as of wood, separated by chopping, cutting or breaking."

Whilst the Shorter Oxford Dictionary defines it as:

"1. a small and esp. thin, piece of wood, or other (specified) material, separated by hewing, cutting or breaking; a thin fragment chipped or broken off." and "5. Wood (or woody fibre) split into thin strips" (though the latter usage relates to "making hats and bonnets".)

These definitions are only of limited assistance in identifying a settled meaning that takes into account the reduction processes through which tree parts and residue are broken down to a state where they become material capable of use in other productive activities. Though the end product is a mulching material rather than a product which one would consider traditional chips, the Tribunal inclines to a view about the nature of the machines that resolves ambiguity about their essential nature in accordance with the beneficial presumptions referred to in paragraph 21 above. In any event, no evidence was led by either party to indicate whether "chip mill" has a special usage that was peculiar to the forestry industry. It therefore finds the machines are capable of falling and do fall within the description of "chip mills".

32. The next question is whether the mobility of machine B deprives it of the character of being a "mill". In the Tribunal's view that factor alone does not. So long as the machine is stationary when functioning it is still capable of being described as a mill. What is significant, in the view of the Tribunal, is that functionally it does the same or similar thing as machine A. Though its operation may take a different form, it functions in association with machine A to complement it in producing mulch. It would seem odd, therefore to hold that it should not qualify for rebate simply because of the way it is constructed.

33. With respect to machine B, the Tribunal does not see the addition of the singular indefinite article "a" before "chip mill" as indicating a sense of a fixed location such as would deprive it of the character of being a mill. The function of the expression "at a chip mill" draws its sense from the contrast made between trees and timber in a forest and operations relating to their cultivation and felling in such a place, as against the locations "at" which later operations take place. The milling of the material by machine B therefore can be said to occur at a chip mill. Further, it does not matter that the mill is itself part of a mixed farming operation. Because the milling might occur at a farm, it does not follow that it does not occur "at a mill" even if that mill is on the farm.

34. For these reasons the Tribunal holds that diesel fuel used in the process performed by both machine A and B, including the loading operations in connection with them, is purchased for use by the applicants in forestry, and therefore is eligible for rebate under s.164. In so concluding, the Tribunal has attempted to give a purposive reading to the provisions in question rather than adopt a narrow linguistic and literal interpretation to particular words such a "chip mill". It has sought to bear in mind, however, the comment of the Tribunal in Re Queensland Electricity Commission and Collector of Customs (1991) 13 AAR 119 , at 125 that in adopting a liberal approach the Tribunal should not stretch commonsense and the plain meaning of words to an extent they will not bear.

(b) "Horticulture" Submissions

35. The applicants contend that their operations, in so far as they involve mixing or blending of milled chips to produce potting mix for supply to horticulturalists and horticultural distributors, are operations "connected with" "horticulture" and hence fall within the definition of "agriculture" in s.164(7) paragraph (f). The expression "connected with" has been interpreted to have a wide and imprecise meaning (The Collector of Customs v Cliffs Robe River Iron Associates (1985) 7 FCR 271 ). Relying on the decision in Australian National Railways v The Collector of Customs (1985) 8 FCR 264 the applicants submit that something may be taken to be "connected with" horticulture if there is a sufficient connection between the activity in question and the main activity, "agriculture", or as more particularly defined in this instance, "horticulture". this is a question of fact and degree. Here, so the applicants submit, the mixture prepared by the applicants has only one purpose which is used in primary production being horticulture. There is no other use to which the material can be put. Further it is not a requirement of the legislation that the applicants need themselves be engaged in horticulture. this is established by the Australian National Railways case (see Shephard and Burchett JJ, at 275). A contractor providing material or equipment can be entitled to rebate.

36. Mr Brysland, for the applicants, submitted that the applicants were in the position of a contractor to Hortico and not to be equated with the manufacturer of goods in another industry outside horticulture who simply sells processed goods for use in primary production. The evidence indicated that the applicants merely sold its entire production of blended potting mix to Hortico; there was no element of agency or that of subcontractor. There was a distinction between the situation under review and that of the manufacturer of super phosphate discussed in the Australian National Railways case. In the latter there had not been a sufficient connection between the manufacture and distribution of super phosphate on the one hand and the performing of the tasks involving the use of super phosphate in the course of farming or other agricultural pursuits on the other. In that case, the identity of the user of the product, and when and how it would be used, was left ambiguous. There was no ambiguity, however, about the use to which the mulching material in this case would be put. This could be identified solely for use in horticulture. Overall, Mr Brysland again emphasised that the legislation should be read beneficially if there were any serious doubt.

37. Regarding the 75 per cent of material not blended for sale by Hortico, it went to other horticulturalists and distributors simply as chip product. It is in no way a blending mix. There are about a dozen nurseries which buy the raw material. Other distributors within the industry also purchase the chip material. These purchasers would mix their own rather than buy bags form Hortico. However, if the applicants' claim in respect of fuel used in the production of that material was not upheld on the basis it was used in "forestry" it could still qualify for rebate as having been used in "horticulture/agriculture". It could not qualify as falling within both "agriculture and "forestry", however, as the definition of the former term in s.164(7) excludes the latter.

38. The respondent's submission is that basically, the applicants in relation to supplying the potting mix are not involved in any activity sufficiently closely connected with primary production. Rather, as a matter of fact, they are to be regarded as a manufacturer of a product which may well be, and probably in many instances, is used by nurseries. The activities of the applicants fail the test suggested in the Australian National Railways case simply because there is not the necessary nexus between their activity, the chipping of bark, and inter-mixing it with fertiliser and sand, and the use of that product in either unmixed or blended form in horticulture. The connection in the present case is too tenuous and remote. The fact that the product may be used by horticulturalists does not of itself mean that it is connected with primary production. The applicants were to be equated with the distributor of super phosphate carried by the applicant in the Australian National Railways case. The chain between the production of the product and its use involves several links which put it too far from its use in agriculture to qualify for rebate.

39. Mr Corke also referred the Tribunal to the decision in Re Pozzolanic Enterprises Pty Ltd and The Collection of Customs (unreported) which supported the view of the respondent. At the time of hearing, that decision was on appeal to the Federal Court. The judgement of Drummond J is now available so the Tribunal can take it into account (see Pozzolanic Enterprises Pty Ltd v The Collector of Customs (1992) 16 AAR 481 ).

40. In that case the applicant was a cartage contractor transporting millproduced stock-feed to various farming properties in New South Wales. The driver of the truck carrying the feed would unload the feed directly at a silo on the farm according to the farmer's direction. The silos were in constant operation supplying the feed stock to pigs and poultry, 95 per cent of the product being so consumed. The unloading apparatus which used diesel fuel was part of the truck. Drummond J took the view that since the apparatus linked directly into the automatic feeding systems it assisted the farmers in the process of that feeding. It was therefore directly associated with the rearing of livestock. The operation of the applicant, whilst the last step in the process of distribution, was also the first step in the process of feeding the stock. It was an integral part of the rearing process that took place on the farm. In light of those factors, Drummond J held that the Tribunal had erred in not having regard to the much closer link with primary production in the case before it than in other cases, such as Australian National Railways, relating to the distribution of manufactured product. The unloading operation in question was more proximate to primary production being an operation that occurred on particular farms and the Tribunal had erred in not appreciating the closeness of the connection. Is the applicants' production and supply of potting mix and unmixed mulch connected with horticulture?

41. In the Tribunal's opinion, the submissions of the respondent are to be accepted in relation to the facts of this case. As the parties concede, in the end it is a question of fact and degree as to whether there is a sufficient connection between the production of the mulch and potting mix, and the horticulture engaged in by those who obtain the mulch or potting mix from the various distributors (including Hortico in the case of the potting mix) to whom the applicants supply their material. Some of the material might be used by home gardeners, though how much is not known. Even if used by particular nurseries by whom it is bought, there is no indication, at the moment the fuel is "purchased for use", that it is intended that a particular nursery will be the ultimate end user. It is true that where there is commercial chain of manufacture, distribution and ultimate usage of a product, a bright-line can rarely to be drawn which categorically determines the point at which one can clearly say that the supplying of a manufactured product for use in primary industry itself takes on the character of something "connected with" that primary industry. To attempt such a logical analysis of the concept of production and to apply that analysis to a process or operation that appears to possess the attributes of such a conception, can be illusory and misleading (see Dixon J in Federal Commissioner of Taxation v Rochester (1934) 50 CLR 225, at 226). But, in this case, as a matter of degree, the possible uses and users of the material, in the opinion of the Tribunal are too indefinite and ambiguous to permit a conclusion that the fuel was purchased for use in, or in an operation connected with, agriculture.

42. Whilst the decision of the Federal Court in Pozzolanic might on first appearance appear to lend some support to the applicants' case, on closer analysis it is clearly distinguishable from the present set of facts. It dealt with circumstances where there was a very high degree of integration of the diesel-user's activities and the farmers to which feed was supplied. The loading operation took place at the point of interface between the supply and distribution of the stock feed and its utilisation by the persons engaged in the process of rearing livestock. As Drummond J pointed out (16 AAR at 487) the last step in distribution was the first step in the rearing of animals. Moreover, the usage of the diesel occurred on location at the primary producer's farms and there was no ambiguity about the purpose for which the supply of stock feed was destined.

43. The situation under consideration is also clearly distinguishable from that discussed by Beaumont J in Collector of Customs v Davis (1989) 10 AAR 439, at 444-448. There the issue was whether the activity of drying parsley that had been harvested by the claimant was an integral aspect of the "cultivation" of the crop such that the activity would bring the claim within "agriculture". The proximity, both physically and temporarily, of the activity of drying to the cultivation of the crop by the claimant was sufficient to justify the conclusion it was "connected with" primary production.

44. No such continuity or integration as was present in Pozzolanic and Davis is evident in the present circumstances. In the case of preparation of the potting mix and mulching product for sale to Hortico, as a distributor, and other distributors and nurseries, there is a significant commercial disjunction between the production of the material and its possible use in horticulture. Distributors are interposed between the applicants and the end users. Even where supplied to nurseries there is no evidence before the Tribunal to determine how they use it. The Tribunal is therefore unable to determine with any degree of satisfaction the extent to which the activities of nurseries relevantly fall within the definition of "horticulture". There is a random element, therefore, as at the time of purchase of the fuel, in the ultimate identity of the user (and hence, use) of the product. Though, as is conceded in the Statement of Agreed Facts, the product is virtually capable of satisfying only one purpose, namely its consumption a commodity in horticultural activities, the lack of a sufficiently close involvement or contribution on the part of the applicants to the using of the product significantly distances the applicants' activities from those of the users of the product in horticulture. In the view of the Tribunal, the production and supply by the applicants cannot be said to be an operation sufficiently "connected with" cultivation. The applicants claim for rebate in this respect fails.

Apportionment

45. It was conceded by the parties that apportionment of diesel usage could be made between usage which was rebatable and that which was not, according to the finding of the Tribunal on the particular aspects of the applicants' operations. On the basis of the conclusions drawn above, the proportion of 35 per cent of rebate claimed in respect of horticultural usage cannot be sustained and to that extent the decision under review must be affirmed. With respect to the remaining 65 per cent of fuel used by the applicants for which rebate is claimed, the Tribunal, concludes that diesel fuel purchased for such use is entitled to rebate.

Decision

46. The Tribunal decides to vary the decision under review to give effect to the findings of the Tribunal that:

(a)

of the 65 per cent of diesel fuel in respect of which rebate is claimed in relation to the operations of machines A and B (see paragraph 8) the diesel fuel so used should be regarded as eligible for rebate; and

(b)

in respect of the further 35 per cent of diesel fuel used in respect of potting mix for Hortico and handling other products, the claim for rebate is rejected.

47. The Tribunal remits the matter to the respondent for calculation of the applicants' entitlement to rebate in accordance with this decision.

Counsel for the Applicant: Mr G Brysland

Counsel for the Respondent: Mr K Corke