Legal database - View: Cases: Re Cooper Bros Holdings Pty Ltd trading as Triple R Waste Management and Federal Commissioner of Taxation

Cooper Bros Holdings Pty Ltd trading as Triple R Waste Management and Commissioner of Taxation
[2013] AATA 99

The impact of this case on ATO policy is discussed in Decision Impact Statement: Cooper Bros Holdings Pty Ltd trading as Triple R Waste Management v Commissioner of Taxation (Published 1 October 2014).

(Decision by: F J Alpins, Deputy President)

Cooper Bros Holdings Pty Ltd trading as Triple R Waste Management
v Commissioner of Taxation

Tribunal:

Administrative Appeals Tribunal

Member:
F J Alpins, Deputy President

Decision date: 26 February 2013

Melbourne

Decision by:
F J Alpins, Deputy President

REASONS FOR DECISION

INTRODUCTION

1. This is an application for review of the Commissioner's objection decision concerning a private ruling made under Division 359 in Schedule 1 to the Taxation Administration Act 1953 (the TAA) with respect to the applicant for the year of income ending 30 June 2011. The proceeding concerns the construction and operation of provisions of the Excise Act 1901 (Cth) (the Excise Act) and Excise Tariff Act 1921 (Cth) (the Tariff Act).

2. I have decided that the Commissioner's objection decision should be set aside and that the objection should be allowed, for the reasons that follow.

PRIVATE RULINGS - DIVISION 359

3. Before turning to consider the issues before the Tribunal, it is first desirable, given certain submissions made by the parties, to set out in some detail the legislative provisions and general principles governing the ambit of the Tribunal's jurisdiction in this proceeding.

4. The Commissioner may make a private ruling upon application by a taxpayer (ss 359-5(1), 359-10 in Sch 1 to the TAA). Section 359-5(1) provides that a private ruling is "a written ruling on the way in which the Commissioner considers a relevant provision applies or would apply to a taxpayer in relation to a specified scheme" (see definition of "scheme" in s 995-1 of the Income Tax Assessment Act 1997 (Cth)). A private ruling "must identify the entity to whom it applies and specify the relevant scheme and the relevant provision to which it relates" (s 359-20(2) in Sch 1 to the TAA).

5. A taxpayer may object against a private ruling in the manner set out in Part IVC of the TAA; the ruling is taken to be a "taxation decision" within the meaning of that Part (s 359-60 in Sch 1 to the TAA). In this proceeding, the applicant has the burden of proving that the private ruling should have been made differently (s 14ZZK(b)(iii) of the TAA).

6. As the prefatory provision of Div 359 (s 359-1) explains, "[a] private ruling is an expression of the Commissioner's opinion". As that opinion concerns a particular question about the application of tax law to the facts identified in the ruling comprising the specified scheme, the Tribunal's jurisdiction is therefore limited to a review of the Commissioner's opinion on that same question. The question before the Tribunal is whether the Commissioner's opinion was correct ( Federal Commissioner of Taxation v McMahon and Another (1997) 79 FCR 127 at 132-134, 140-141, 149-150; Federal Commissioner of Taxation v Reef Networks Pty Ltd (2004) 57 ATR 375 at [6]; Lamont v Federal Commissioner of Taxation (2005) 144 FCR 312 at 319; Cooperative Bulk Handling Ltd v Federal Commissioner of Taxation [2010] FCA 508 at [13], [15]-[16]). The answer to that question therefore depends upon the scheme on which the ruling is founded - the Tribunal's review turns on the specified scheme just as the ruling did.

7. As Lockhart J said in McMahon at 133, quoted with approval by the Full Federal Court in Hastie Group Ltd v Commissioner of Taxation (2008) 172 FCR 496 at [3]:

When making a private ruling the Commissioner does not make findings of fact. He simply identifies facts and then states his opinion about the way in which the relevant tax laws apply to the applicant in relation to those identified facts .

(see also McMahon at 149 per Emmett J; Lamont at [23]; Cooperative Bulk Handling at [15]).

8. That being so, the Tribunal cannot make findings of fact in this proceeding. The Tribunal can only consider the stated facts comprising the scheme the subject of the ruling. Furthermore, the Tribunal cannot "redefine" the scheme (see McMahon at 133, 141, 144-146, 150) - the Tribunal is confined by the scheme as it has been described in the ruling and cannot depart from that description in any respect. The Tribunal cannot create its own description of the scheme, elaborate upon or make assumptions about the scheme, nor can the Tribunal add further facts, substitute other facts or otherwise alter the scheme ( McMahon at 133-134, 140-146, 149-150; Bellinz v Federal Commissioner of Taxation (1998) 84 FCR 154 at 160; Reef Networks at [6]; Lamont at [21], [26]; Hastie Group at [3]; Cooperative Bulk Handling at [16]).

THE SCHEME

9. The ruling the subject of this proceeding set out the following facts as constituting the scheme:

Cooper Bros Holdings Pty Ltd trading as Triple R Waste Management (you) collects used oils drained from automotive sumps, machinery and transmissions serviced in mechanical workshops and industrial engineering workshops .

When the oil is drained from automotive engine sumps, it is usually of a dark brown or black appearance due to carbon deposits from fuel combustion. Microscopic particles of metal from friction wear and traces of unignited fuel, condensed moisture and glycol coolant may also be present in the oil when drained .

You state that none of these foreign substances can be quantified at the point at which the oil is drained and will vary from vehicle to vehicle .

Further, as you have stated, service intervals vary greatly from vehicle to vehicles [sic], the condition of the collected oil drained from vehicles will also vary greatly .

As such, there is no typical quality or condition of used oil drained from automotive sumps collected .

At the point of draining oil from an automotive sump, it may be undesirable as an engine lubricant however it is quite suitable as fuel oil. You state that you are aware of several workshops which retain the used oil drained from the sumps to fuel their workshop heating systems during winter .

After the oil is drained from automotive sumps, it is deposited into a storage vessel until you come to empty it .

Depending on circumstances such as length of time the used oil is in the vessels before collection, type of workshop and the particular practices of the workshop, the used oil will become further contaminated by condensed moisture, sludge formed by the reaction of oil with condensed moisture and other substances deposited into it by the workshop due to carelessness, inability to segregate or to deliberately avoid the cost and collection and disposal of contaminated water, redundant fuel, used glycol coolant and various other prescribed waste substances .

In many cases, foreign objects such as nuts, bolts, rags, gloves and other matter become deposited with oil in the used oil storage vessels .

When you collect the used oil, it is drawn from your client's vessel by a pump fitted to your collection vehicle into the tank mounted on the collection vehicle .

The drivers of your collection vehicles are trained to extract the used oil out of your client's vessels to the approximate 'free water' point. This is done to reduce the amount of water in the used oil that end in the collection vehicles .

However, any foreign object, substance, matter or debris in the client's vessel that is small enough to enter the hose connected to the pump on the collection vehicle is drawn up with the oil .

In order to protect the pump from damage by foreign objects and matter, the oil is passed through a coarse mesh strainer. The coarse mesh strainer used at the point of collection is described as a 'nut and bolt catcher' or 'a perforated metal basket'. The perforated diameters range between 3.0mm and 4.5mm (3000 and 4500 microns ).

When your collection vehicles are full, they transport the used oil to Excise licensed depots managed and operated by you in Melbourne and Bendigo .

As stated by you, during unloading, the used oil is passed through another filter to trap any solid particulates which has not been captured by the coarse mesh strainer during loading. The purpose of this is to minimise the amount of sludge and sediment build up in the used oil storage tanks so that capacity utilisation is optimized and the costs of subsequent sludge disposal is minimised. The filtration at the point of transfer to the storage tank is described as a 'filter sock or bag' with a nominal rating of 400 micron .

You advise that the used oil at both depots is not subject to testing until the end of the dewatering process and that this testing is limited to moisture specifications and for environmental reasons .

Melbourne depot

You state that due to : capacity constraints, rate at which used oil is generated, the demand for burner fuel and the variability of used oil contamination, the time required for gravity and natural solar energy to achieve the separation of excess free moisture and other substances suspended in the used oil is too long to be commercially practical .

Instead, you use steam that goes through heating coils inside tanks dedicated to the separation process to raise the temperature of the used oil until it begins to 'simmer'. You state that the steam is not in direct contact with the used oil and that it cannot react with the used oil and break down any molecular bonds. All it can do is accelerate the separation of substances of different relative density .

The steam is accessed from a 'grid' which services the whole site operated by your landlords and is not generated or produced specifically for you .

You advise that you cannot regulate the temperature of the steam but can only govern the amount of steam used by having it in one of two states : either on or off .

To determine whether the oil has reached 'simmering' point, an operator climbs to the top of the tank being heated and looks into the manhole to see whether the oil is bubbling. If the oil is bubbling the steam is switched off .

You contend that using the steam as a heat source requires no special skill, complex methodology, specialised plant or equipment, proprietary knowledge or technical expertise and is not governed by a specific time or temperature control .

You state that after the used oil has been heated up and cooled, it is still dark brown or black, has the same viscosity, and contains the same chemicals, additives, friction modifiers and other ingredients as it had when it came out of the sumps of the vehicles it was derived from .

You contend that it is essentially the same as the used oil that came from the automotive sumps. It is not desirable for use as an engine lubricant, is suitable as a burner or furnace fuel, but not suitable for use as fuel in an internal combustion engine .

You state that the residual moisture will vary but the degree of variation cannot be quantified as the degree of moisture in the oil when it is drained cannot be quantified .

You have advised that normally residual suspended moisture in used automotive oil after treatment ranges between 6 % and 8 %. You have also identified below that sometimes the moisture content can be around 10 % at the end of [ sic ] dewatering process .

Bendigo depot

You have advised that your Bendigo depot does not have any access to steam or other means of heating. As such, all separation of excess moisture and other substances of higher relative density than oil occur by using a combination of gravity and natural solar energy .

End product: both depots

The volume handled at your Bendigo depot is less than your Melbourne depot. The used oil collected in the rural and regional areas of Victoria tends to be less contaminated than that collected in metropolitan Melbourne and so requires less time to settle out. You contend that in either case, there is no constant, consistent or predictable standard of quality that could be ascribed to the used oil .

You state that the end product at either depot is not done to specific requirements of particular customers. The dewatering of the product is done as clients do not like paying for water. You advise that although the usual result of the process is at 6 % to 8 % suspended moisture content ; sometimes moisture content can be around 10 % at the end of the dewatering process .

You state that the only testing done by you after the used oil has been de-watered are those that are required to comply with EPA laws, Dangerous Goods regulations and, to confirm that the used oil is within reasonable tolerance limits for suspended moisture required by customers .

The EPA prescribes that all used oil must be tested for polychlorinated biphenyls (PCB) concentration to ensure that it does not exceed 2ppm. Dangerous Goods regulations prescribe that you are not permitted to receive, store or sell used oil with a flash point below 62 ° C .

The testing of the dewatered used oil does not cover ash content or carbon residue for the used oil .

Testing for ash content is conducted on your high grade burner fuel, but that [sic] this is a small proportion of your output of burner fuel .

10. I note that a number of the facts in the stated scheme have been prefaced by phrases apparently qualifying those facts by indicating that they merely constitute statements and contentions made, and advice given, by the applicant. I consider that the use of such phrases is superfluous and betrays a misunderstanding of the import of facts identified in a private ruling. A ruling is made on the basis that the identified facts are correct; however, they cannot be taken to have been accepted by the Commissioner as being correct merely by their use in the ruling ( McMahon at 132-133, 149-150; Lamont at [23], Cooperative Bulk Handling at [15]).

THE RULING

11. The ruling was unfavourable to the applicant with respect to its activities at its depot in Melbourne but was favourable with respect to its activities at its depot in Bendigo. It set out the following questions and answers: Question 1:

Are you manufacturing an excisable good within the meaning of section 4 of the Excise Act 1901 (Excise Act) if you remove foreign matter by filtration and separate excess free moisture by applying heat through heating coils positioned within storage tanks at your Melbourne depot ?

Answer:

Yes, you are manufacturing an excisable good at your Melbourne depot within the meaning of section 4 of the Excise Act .

Question 2:

Are you manufacturing an excisable good within the meaning of section 4 of the Excise Act if you remove suspended foreign matter by filtration and separate excess moisture by naturally occurring means (gravity/heat from the sun) in storage tanks at your Bendigo depot ?

Answer:

No, you are not manufacturing an excisable good at your Bendigo depot within the meaning of section 4 of the Excise Act .

12. The applicant objected to the ruling on the grounds that the ruling ought to have answered the first question negatively. The objection was disallowed on the basis that the ruling was correct in that regard. This proceeding therefore concerns the application of relevant provisions of the Tariff Act and the Excise Act with respect to the applicant's activities at its Melbourne depot.

13. I note that the first question posed in the ruling refers to the removal of "foreign matter" by filtration at the Melbourne depot while the second question refers to the removal of "suspended foreign matter" (emphasis added) by filtration at the Bendigo depot. Given that the facts concerning the filtration of used oil stated in the ruling concern both depots, it is not apparent to me why the questions differ to that extent. However, I do not consider that anything turns on that distinction, as is apparent from my analysis set out later in these reasons.

RELEVANT LEGISLATION AND ISSUES BEFORE THE TRIBUNAL

14. Duties of excise are imposed by the Tariff Act and governed by the Excise Act. The two Acts are to be read as one (s 2 of the Tariff Act and s 6 of the Excise Act).

15. The term "excisable good[s]" employed in the ruling is relevantly defined in s 4 of the Excise Act to mean "goods in respect of which excise duty is imposed by the Parliament". Section 5(1)(a) of the Tariff Act relevantly provides that excise duty is imposed on "all goods dutiable under the Schedule and manufactured or produced in Australia". As the criteria in s 5(1)(a) are conjunctive, it is therefore necessary to consider both whether relevant goods have been "manufactured or produced" in Australia and also whether they are dutiable under the Schedule to the Tariff Act. In Caltex Australia Petroleum Pty Ltd v Federal Commissioner of Taxation (2008) 173 FCR 359, Sundberg J described the first of these two issues as a "threshold question" (at 378).

16. With respect to the second issue, as Sundberg J explained (at 374), " ... the Schedule provides a general description of the subject products followed by a more specific delineation of the dutiable products together with their related rate of duty".

17. Item 10 of the Schedule enumerates categories of various petroleum and related goods. The Item in issue is Item 10(d), which concerns "liquid hydrocarbon products derived through a recycling, manufacturing or other process". It was not in dispute that, if that Item applied, the applicable head of duty was sub-item 10.28, which concerns "petroleum products (other than blends) not elsewhere included" (other than certain excluded goods not relevant for present purposes), therefore having a residual operation with respect to certain goods falling within that item. There was some suggestion that the applicant would seek to rely upon sub-item 10.18, which concerns "fuel oil" (although it has the same rate of duty as sub-item 10.28); however, that contention was not pressed in the applicant's supplementary written submissions lodged after the hearing.

18. The issues before the Tribunal are therefore:

(a): whether the oils at the Melbourne depot the subject of the ruling were "manufactured or produced" by the applicant for the purposes of s 5(1) of the Tariff Act; and
(b): if so, whether they are properly characterised as "liquid hydrocarbon products derived through a recycling, manufacturing or other process" within the terms of Item 10(d) of the Schedule to that Act.

MATERIAL IN DOCUMENTS OTHER THAN RULING

19. It is necessary at this point to say more about the operation of the provisions of Division 359 of Schedule 1 to the TAA. That is so because each party, while accepting that the Tribunal's jurisdiction in this proceeding is of a limited nature, nevertheless sought to rely upon material contained in documents other than the notice of private ruling in issue.

Application for ruling and additional information provided before ruling

20. First, both parties submitted that the Tribunal should have regard to the application for the ruling and also to a letter under cover of which the applicant provided further information upon the Commissioner's request prior to the ruling being made (see ss 357-105 & 357-115 in Schedule 1 to the TAA).

21. I did not understand either party to have suggested that the aggregate content of those documents differed in any material way from the scheme set out in the ruling, and there was little emphasis placed by either party on this submission. Nevertheless, in my view the Tribunal cannot properly have regard to those documents. The notice of private ruling in issue is a self-contained document, in that it does not describe the scheme by reference to material contained in any other document. Accordingly, the Tribunal can only have regard to the scheme as described in the ruling itself (see Bellinz v Commissioner of Taxation at 160, endorsed in Cooperative Bulk Handling Ltd v Commissioner of Taxation at [16] per Gilmour J with respect to Div 359; Federal Commissioner of Taxation v McMahon at 150).

Additional material considered after ruling - s 359-65

22. More significantly, each party also submitted that the Tribunal should have regard to documents containing additional information provided by the applicant after the ruling was made, that information being said to have been considered by the Commissioner pursuant to s 359-65(1) in Sch 1 to the TAA in making his objection decision.

23. Section 359-65 relevantly provides:

(1)

In deciding whether to allow (wholly or in part, or to disallow, an objection under Part IVC against a [...] private ruling, the Commissioner may consider any additional information that the Commissioner did not consider when making the ruling.

......

(3)

However, if the Commissioner considers that the additional information is such that the [...]scheme to which the application related is materially different from the scheme to which the ruling relates:

(a): the Commissioner must request the applicant to make an application for another [...] private ruling; and
(b): The objection is taken not to have been made.

24. Although the parties submitted that the Tribunal should have regard to various documents provided by the applicant after the ruling was made, it is convenient first to mention the material considered by the Commissioner in making his objection decision upon which both parties particularly sought to rely. Following a visit by officers of the Australian Taxation Office to the applicant's premises after its objection was lodged, the Commissioner sought further information concerning the processes used by the applicant; the basis of the arrangements pursuant to which the applicant collected used oil; and the specifications set and external testing required by certain customers of the applicant. In making his objection decision, the Commissioner had regard, amongst other things, to the information contained in documents provided by the applicant in response to those questions.

25. At the hearing, both parties focused and sought particularly to rely upon the additional information concerning those customer specifications and that external testing. It appears from the documents before the Tribunal that the information concerning the specifications consists of extracts from contracts with those customers, one being a contract with "Southern Oil" and another being a contract for the supply of "Waste Oil Kiln Fuel".

26. The Southern Oil specifications concern the concentration of polychlorinated biphenyls (PCB) (given requirements prescribed by the Environment Protection Authority (EPA)) and the water content, chlorine content, flash point and viscosity of the oil. The specifications for the supply of Waste Oil Kiln Fuel concern viscosity, density, sulphur content, pour point, flash point, moisture content, specific energy and filtration. They also provide that the oil must not exceed maximum PCB concentration, nor may it contain glycol coolant, fire retardants or paint thinners. The sample document recording external testing of the oil sold by the applicant indicates that testing was undertaken for PCB levels, flash point, water content, viscosity, chlorine content, density, calorific value, sulphur and ash content.

27. I turn now to mention the other material provided by the applicant after the ruling was made. It was not in dispute that the Commissioner had regard to information provided in the applicant's objection. However, save for in one essentially immaterial respect, neither party focussed on the content of the objection, which primarily took the form of submissions.

28. The Commissioner's reasons for his objection decision also indicate that he had regard to information provided during a telephone conversation between the applicant's general manager Mr Harry Kay (referred to in another document before the Tribunal as the "Group Chief Executive") and Ms Astrid Rodricks of the Australian Taxation Office shortly after the objection was lodged. Again, neither party focused on the content of the file note of that conversation prepared by Ms Rodricks, which essentially concerned administrative matters and comments made by Mr Kay in support of the objection. I note, however, that the file note indicated that Mr Kay had questioned the source of a stated fact in the ruling concerning the extent to which drivers of collection vehicles extracted used oil from storage vessels.

29. In a letter then sent to the applicant, it was said that additional information was required by the Commissioner for the making of the objection decision. Another document to which the Commissioner had regard in making that decision was email correspondence from Mr Kay setting out his response to some of the questions posed in that letter. In his email, Mr Kay answered the question asked in that letter about whether the drivers of the applicant's collection vehicles collect "everything in the tank at every place" (that question apparently having arisen in light of Mr Kay's query) and the question about whether the applicant conducted tests of the ash and water content of the oil at point of collection. Mr Kay answered the first question positively (albeit with some qualifications) and the second question negatively.

30. As I have said, both parties, in making their submissions about the substantive issues in this proceeding, referred to and sought to rely upon the material to which I have just referred, particularly that concerning the customer specifications and external testing. The applicant submitted that, upon review of the objection decision, the Tribunal could have regard to the additional information considered by the Commissioner by operation of s 43 of the Administrative Appeals Act 1975 (Cth) (the AAT Act), which governs the Tribunal's decision on review. In support of that submission, the applicant adverted to the fact that the predecessor provisions governing private rulings considered by the Full Federal Court in McMahon did not include a provision equivalent to s 359-65 (see Baini v R [2012] HCA 59 at [15] in this regard).

31. In Cooperative Bulk Handling (at [16]) Gilmour J held, endorsing the decision of the Full Federal Court in Bellinz at 160, that in reviewing a ruling made under Division 359:

... the only material to which the Court can have regard is the ruling and documents identified in the description of the scheme which were either provided by the applicant or were used by the Commissioner ....

However, as his Honour was not concerned with and did not address s 359-65 nor the Tribunal's task upon review, I consider that I should say more about that provision, particularly in the context of s 43 of the AAT Act.

32. The prefatory words of s 43(1) of the AAT Act provide that " [f]or the purpose of reviewing a decision , the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision" (emphasis added). The "powers and discretions" to be exercised by the Tribunal pursuant to s 43(1) therefore depend not only upon the terms of the relevant enabling enactment but also upon the nature of the decision under review (see Shi v Migration Agents Registration Authority (2008) 235 CLR 286 at 295, 300; Fletcher v Commissioner of Taxation (1988) 19 FCR 442 at 452; Secretary to the Department of Social Security v Riley (1987) 17 FCR 99 at 104-105; Secretary, Department of Social Security v Hodgson (1992) 37 FCR 32 at 39-40).

33. Given the "intersecting operation" of ss 25 and 43 of the AAT Act and Pt IVC of the TAA and Div 359 (see Shi v Migration Agents Registration Authority at [93] per Hayne and Heydon JJ), at [25] per Kirby J), in my view the Tribunal is therefore empowered, by operation of s 43(1), to exercise the Commissioner's discretion under s 359-65(1) for the purpose of reviewing the Commissioner's objection decision. Furthermore, I consider that the Tribunal may consider additional information otherwise within the terms of s 359-65(1) irrespective of whether the Commissioner has in fact considered that material in making his objection decision ( Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409; Shi v Migration Agents Registration Authority (2008) 235 CLR 286).

34. Section 359-65(1), when read in isolation, appears to have a wide operation in terms of the kinds of additional material to which the Commissioner may have regard. The use of the preposition "[i]n" preceding the words "deciding whether to allow (wholly or in part), or to disallow, an objection under Part IVC against a private ruling" (see s 14ZY of the TAA) is generally understood when used in similar syntactic contexts as being synonymous with the phrase "in the course of", and therefore having a meaning differing from that of phrases such as "for the purpose of" (see Federal Commissioner of Taxation v Payne (2001) 202 CLR 93 at 99). Put another way, the prefatory words of s 359-65(1) concern the occasion giving rise to the exercise of the discretion to consider additional information rather than, in themselves, limiting the kind of additional information to which regard may be had (see also ss 357-115, 357-120). Furthermore, s 359-65(1) provides that the Commissioner may consider any additional information within the terms of the provision. I note that the word "information" is relevantly defined in the Macquarie Dictionary (5th edition) to mean "knowledge communicated or received concerning some fact or circumstance".

35. However, in my view, s 359-65(1), when read properly in the wider context of that section, Div 359 as a whole and the relevant provisions of Pt IVC of the TAA, only permits consideration of material that is informative about the facts comprising the scheme, as it has been described in the ruling. Section 359-65 permits neither the Commissioner in making his objection decision, nor the Tribunal in reviewing that decision, to redefine the scheme. (By way of contradistinction, additional information taken into account by the Commissioner pursuant to s 357-115 in considering an application for a ruling may, in my view, be reflected in the scheme specified in a ruling made under s 359-5).

36. As I have explained, in this proceeding the Tribunal is concerned with the correctness of the Commissioner's opinion expressed in the ruling in issue. It remains the case under Div 359 that the Tribunal is confined by the scheme specified in the ruling (see Hastie Group Ltd v Commissioner of Taxation at [3]; Cooperative Bulk Handling at [16]). Accordingly, in my view the Tribunal may only consider additional information pursuant to s 359-65(1) to the extent that it bears upon the correctness of the ruling in issue.

37. In my view, the terms of s 359-65(3) confirm that that is so. The additional information which may be considered pursuant to s 359-65(1) is necessarily confined by the terms of that sub-section. As the prefatory adverb "[h]owever" in s 365(3) indicates, that provision will operate in circumstances alternative to those with which s 359-65(1) is concerned. If the Commissioner forms the requisite view for the purpose of s 359-65(3), then the discretion in s 359-65(1) will have no operation because there will be no occasion for the objection decision in question to be made (see ss 359-65 (3) paragraphs (a) and (b)). (Given the discrete operation of s 359-65(3), it seems to me that the phrase "the additional information" is employed in that provision to refer to "additional information that the Commissioner did not consider when making the ruling" with which s 359-65(1) is prima facie concerned, not additional information considered pursuant to that provision. Further, the word "consider" is employed in s 359-65(1) to mean that the information may be taken into account; while in s 359-65(3) it is employed to mean that the Commissioner is of the requisite view: see Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 at 15-16 per Mason J; Lygon Nominees Pty Ltd v Commissioner of State Revenue (2007 23 VR 474 at 482).)

38. In my view, the word "materially" in s 359-65(3) cannot properly be read as permitting additional information to be considered by the Commissioner or the Tribunal pursuant to s 359-65(1) so as to interfere with the description of the scheme in the ruling in any way. The word is employed not in the context of the ruling the subject of the objection decision but rather in the context of circumstances which warrant the making of another private ruling. (I note in passing that the phrase "scheme to which the application related" in s 359-65(3) appears designed to take the scheme specified in any subsequent ruling out of the realm of the "hypothetical facts" to which Lockhart J referred in McMahon (at 132-133); see also per Emmett J at 150.)

39. Moreover, I consider that such a construction would subvert the proper operation of Division 359 and the relevant provisions of Pt IVC of the TAA. To the extent that there might be said to be any conflict between the terms of s 359-65 and the provisions concerning the making and review of private rulings, in my view the meaning of the former is to be adjusted so as to yield to the meaning of the latter ( Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]-[70]).

40. Each of the parties suggested (albeit the applicant less emphatically) that the Tribunal could properly have regard to the additional material upon which they sought to rely on the basis that the Commissioner had not formed the requisite view for the purposes of s 359-65(3). It seems to me that that is not to the point, given that "the Tribunal's task is 'to do over again'" what the Commissioner did ( Shi v Migration Agents Registration Authority at [100] per Hayne & Heydon JJ, quoting with approval Mobil Oil Australia Pty Ltd v Federal Commissioner of Taxation (1963) 113 CLR 475 at 502 per Kitto J). Furthermore, it is self-evident that, if the Commissioner had formed that view, the Tribunal would not now be reviewing the opinion expressed in the ruling in issue.

41. The Tribunal could only ever be concerned with circumstances within the terms of s 359-65(1), not those with which s 359-65(3) is concerned. In my view the Tribunal cannot exercise the power under s 359-65(3), as it is not a power associated with the decision under review and therefore does not fall within the terms of s 43(1) ( Hodgson at 39-40 per Hill J; Fletcher at 452; see McMahon at 151 per Emmett J, citing CTC Resources NL v Commissioner of Taxation (1994) 48 FCR 397). The Tribunal is concerned with the correctness of the ruling under review, not whether another ruling ought to have been made in its place. Neither party contended that the scheme specified in the ruling was somehow based upon insufficient information (see s 357-105; see McMahon at 151 per Emmett J).

42. It is appropriate at this point to have regard to the scheme described in the ruling. No mention is made in the scheme of specifications or external testing of the kind with which the additional material was concerned. I note, by way of contradistinction, that the facts stated in the objection decision include the statement that "[y]our end products are tailored according to your customer's [sic] specifications and requirements. ..." before making reference to the particular customer specifications to which I have referred. Similarly, the reasons for the objection decision refer to the sample testing.

43. I note in passing that I have not read the rather ambiguous statement in the ruling that "the end product ... is not done to specific requirements of particular customers" as indicating that there are no customer specifications but rather, in context, as a reference to whether the processes undertaken by the applicant are directed towards meeting customer specifications. I have not read the similarly ambiguous reference to the kind of testing undertaken by the applicant as suggesting that no external testing is undertaken. In any event, as I am not engaged in investigating the facts comprising the specified scheme nor in making findings of fact in this proceeding (see Cooperative Bulk Handling at [16]), I have taken the scheme "as it comes" (see McMahon at 145 per Beaumont J).

44. In my view, in this proceeding the Tribunal cannot have regard to the additional information concerning the customer specifications and external testing upon which the parties sought to rely. Consideration of that material would necessarily require that the Tribunal impermissibly "travel beyond those facts as identified in the ruling" ( McMahon at 133 per Lockhart J). For the sake of completeness I note that, for the same reason, the Tribunal cannot have regard to the information about the fact that testing for ash and water content is not conducted at the point of collection (which, I note, is reflected in the reasons for the objection decision). Given the paramountcy of the scheme, I consider that the Tribunal must have regard to the fact concerning the collection of used oils from storage tanks as it is stated.

45. Even if I am wrong in concluding that the Tribunal cannot have regard to the additional information upon which the parties sought to rely (particularly with respect to the customer specifications and external testing), as is made evident by my analysis of the substantive issues before the Tribunal, consideration of that material would not have altered my conclusion about the correctness of the ruling in any event. Put another way, if the facts constituting the scheme set out in the ruling had reflected that material, it would not have altered my conclusion in that regard.

46. The Commissioner submitted that the Tribunal should also have regard to additional information reflected in the facts set out in the reasons for the objection decision. In his oral submissions, the Commissioner described the objection decision as being "complementary" to the ruling. The applicant submitted, however, that material contained in the reasons for the objection decision did not fall within the terms of s 359-65(1) in Sch 1 to the TAA, given that the provision is concerned with consideration of additional information for the purpose of making that decision. I accept the applicant's submission. For the reasons I have indicated, I reject the Commissioner's submission that the Tribunal can have regard to facts stated in the reasons for the objection decision in addition to the facts stated in the ruling with which that objection decision is concerned.

47. It is necessary to mention one respect in which the Commissioner contended that the applicant had indulged in impermissible paraphrasing of the facts stated in the ruling. As is set out earlier in these reasons, it was stated in the ruling that:

At the point of draining oil from an automotive sump, it may be undesirable as an engine lubricant however , it is quite suitable as fuel oil . You state that you are aware of several workshops which retain the used oil drained from the sumps to fuel their workshop heating systems during winter . [Emphasis added].

48. In the applicant's written submissions, it referred to this aspect of the scheme in a certain way with which the Commissioner took issue in his supplementary written submissions lodged after the hearing. I note that, in considering the ruling, I have had regard to that aspect of the scheme as it has been stated in the ruling.

49. In its written submissions, the applicant invited the Tribunal to take into account certain facts characterised as "underlying" the facts set out in the ruling. Although the Commissioner did not take issue with that aspect of the applicant's submissions, I consider that, for the reasons I have given, the Tribunal may only have regard to the scheme as it is described in the ruling.

EXPERT EVIDENCE

50. The applicant relied upon the expert evidence of Professor Ian Rae, given partly in the form of a report prepared for the proceeding.

51. For the reasons I have explained, in my view the Tribunal may have regard to Professor Rae's evidence in this proceeding, but only to the extent that it serves to inform the Tribunal about the facts comprising the scheme specified in the ruling.

52. I have had regard to Professor Rae's evidence given at the hearing to that extent only in considering the correctness of the ruling. To the extent that Professor Rae's evidence contradicted, deviated from or otherwise extended beyond the scheme as it has been described in the ruling, I have necessarily disregarded it. As Professor Rae's report was largely not informative about the scheme, I have had little regard to it.

53. Professor Rae's report was not of assistance in any event for more general reasons. The report did not indicate the question or questions that Professor Rae had been asked to address. Nor did it indicate with any specificity the facts or assumptions upon which it was based, nor the materials to which he had had regard in its preparation. Those matters were addressed in his evidence given at the hearing. Professor Rae said that he had been engaged by Mr Kay to prepare his report. He had met with Mr Kay in a coffee shop after Mr Kay had asked him in email correspondence to recommend an expert for the purpose of the proceeding, had told Mr Kay that he thought that there "might be a basis for arguing a case" that the applicant's activities did not constitute manufacturing and had then been asked by Mr Kay to prepare a report "embodying that statement and providing the details of where I knew that from".

54. When asked what he had meant by his reference to manufacturing in his conversation with Mr Kay leading to his engagement, Professor Rae responded:

I was speaking in a technical chemical way because that's where my experience lays [ sic ], about what was manufacturing ... I saw manufacturing as some process that changed the nature of the chemical substance .

Under cross-examination, Professor Rae was asked what question he had been asked to address in his report. He responded that:

[t]he question was what constitutes manufacturing, and of course being a chemist that was implicitly a chemical point of view .

55. In his report, Professor Rae stated that "it can be held" that the applicant's activities at the Melbourne depot do not constitute manufacturing because the process by which water and contaminants are separated from the used oil does not change the chemical composition of the oil. Professor Rae referred to other legislation including North American statutes and also to various scientific discussion papers and standards in support of that proposition.

56. In my view, Professor Rae's evidence given at the hearing confirmed what seemed apparent on the face of his report - namely, that it was essentially a submission. I observe in passing that that it seems to me that it would have been more appropriate and likely of greater assistance if Professor Rae had been engaged by the applicant's solicitors in the customary manner.

57. Furthermore, I accept the Commissioner's submission that the content of Professor Rae's report does not materially assist in the resolution of the issues before the Tribunal. As I explain later in these reasons, the main issue before the Tribunal is whether the relevant oils have been "manufactured" or "produced" according to the ordinary meaning of those words, being a question of fact. Neither the question to which the report was directed nor the statutes and other materials to which Professor Rae referred in his report assist the Tribunal in that regard.

CONSIDERATION Section 5(1) Excise Tariff Act - manufactured or produced

58. I now turn to consider the question of whether the relevant oils were "manufactured or produced" by the applicant for the purposes of s 5(1)(a) of the Tariff Act. It is important to bear in mind that the proper answer to that question is to be found in the text of the statute. The words employed in judicial decisions about that or similar statutes cannot be relied upon in a manner which displaces the statutory text. That is to say, the words of such decisions cannot properly be treated as if they are the statutory text.

59. That principle of statutory interpretation was recently reiterated by the High Court in Baini v R [2012] HCA 59 at [14]:

Paraphrases of the statutory language, whether found in parliamentary or other extrinsic materials or in cases decided under the Act or under different legislation , are apt to mislead if attention strays from the statutory text. These paraphrases do not, and cannot, stand in the place of the words used in the statute . [Emphasis added].

60. In Brennan v Comcare (1994) 50 FCR 555 at 572, Gummow J (then of the Federal Court) explained the appropriate use of judicial decisions in statutory interpretation as follows:

The judicial technique involved in construing a statutory text is different from that required in applying previous decisions expounding the common law. In the latter class of case, the task is to interpret the legal concepts which find expression in the various language used in the relevant judgments . The frequently repeated caution is against construing the terms of those judgments as if they were the words of a statute . The concern is not with the ascertainment of the meaning and the application of particular words used by previous judges , so much as with gaining an understanding of the concepts to which expression was sought to be given . [Emphasis added].

(See also Shi v Migration Agents Registration Authority (2008) 235 CLR 286 at [92]; Ogden Industries Pty Ltd v Lucas [1970] AC 113 (UKPC) at 127; Damjanovic & Sons Pty Ltd v The Commonwealth of Australia (1968) 117 CLR 390 at 407-409 per Windeyer J.) I consider that the principle to which I have referred must also be followed by the Tribunal in reviewing the objection decision in issue.

61. The parties focused on the construction and application of the word "manufactured" in s 5(1) of the Tariff Act, although their submissions were also directed towards the word "produced", treating the two terms as essentially synonymous. The words "manufactured" and "produced" in s 5(1) each bear their ordinary meaning ( Caltex at 378-381, especially at [66]-[67], [71] and [73]).

62. I note that the word "manufacture" is defined in s 4 of the Excise Act as follows:

" Manufacture includes all processes in the manufacture of excisable goods and, in relation to beer, includes the provision to the public at particular premises of commercial facilities and equipment for use in the production of beer at those premises ."

I address that definition later in these reasons.

63. In the Macquarie Dictionary (5th edition), the verb "manufacture" is defined as meaning, amongst other things, "to make or produce by hand or machinery, especially on a large scale" and "to work up (material) into form for use". The meanings given in the Shorter Oxford English Dictionary (6th edition) include, similarly, "[m]ake or fabricate from material; produce by physical labour or machinery, now spec. on a large scale" and "[b]ring (material) into a form suitable for use".

64. The given meanings of the verb "produce" include, in the Macquarie Dictionary, "to bring into existence; give rise to; cause: to produce steam" and " Economics to create (something having an exchangeable value)" and, in the Shorter Oxford English Dictionary, "[b]ring (a thing) into existence; bring about, effect, cause, (an action, result, etc.)" and "[c]ompose, make, or bring into existence by mental or physical labour (a material object)".

65. In Caltex , Sundberg J quoted with approval the following exposition of the ordinary meaning of the terms "manufacture" and "production" given by Lockhart J in Commissioner of Taxation v Jax Tyres Pty Ltd (1984) 5 FCR 257 at 261 (which had been given in the context of the legislation governing sales tax):

The primary meaning of the word " manufacture " when used as a verb is to make something by hand ; but since the industrial revolution the word has come to mean manufacture by machinery, often on a large scale and with a division of labour. This accords with the dictionary definition ...

To manufacture an article necessarily involves producing a different article from the articles , materials or ingredients from which it was made . As Darling J said in McNicol v Pinch [ 1906 ] 2 KB 352 at 361 : I think the essence of making or of manufacturing is that what is made shall be a different thing from that out of which it is made . That passage was approved and applied by Dixon J in Federal Commissioner of Taxation v Jack Zinader Pty Ltd ( 1949) 78 CLR 336 - the leading case in this field. Whether the article which results from the process of manufacturing is a different article from the constituents or ingredients from which it was made is a question of fact : the Jack Zinader case .

" Production " ... is a word of wide import ; but it still involves the element of producing something different from the materials from which it was made. It is not possible to formulate precise definitions of such general terms as " manufacture " or "' production "; but they do not bear a restricted meaning. Whatever answers the description of " manufacture " or " production " of goods according to accepted usage of the English language is within the Act . [Emphasis added.]

(See also per Sheppard J at 266-267; Jax Tyres Pty Ltd v Federal Commissioner of Taxation (1984) 3 FCR 252 at 259-260 per Beaumont J (affirmed on appeal); Commissioner of Taxation v Softex Industries Pty Ltd (2001) 107 FCR 111 at 114 per Ryan and Hely JJ.)

66. The terms "manufactured" and "produced", according to their ordinary meaning, therefore necessarily require that an exercise in comparison be undertaken (see MP Metals Pty Ltd v Federal Commissioner of Taxation (1968) 117 CLR 631 at 649 per Menzies J), in order to ascertain whether the goods in question are a "different thing" from that out of which they are made. As Windeyer J observed in MP Metals at 638 (at first instance, in an income tax context), the requisite difference may lie not only in the physical characteristics of the goods but also in the use to which they can be put:

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 . ....... 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 . [Emphasis added.]

67. Similarly and more succinctly, Lockhart J said in Jax Tyres at 264:

The essence of manufacturing implies a change from which a new and different article must emerge having a distinctive character or use .

That statement was also endorsed by Sundberg J in Caltex (at 380).

68. The question of whether something has been "manufactured" according to the ordinary meaning of that word is therefore one of fact and degree ( Jax Tyres (Full Federal Court) at 261, 267; see also Jax Tyres (at first instance) at 260 per Beaumont J; Softex Industries at 116). As Beaumont J said in Jax Tyres at 260 (endorsing MP Metals at 649 per Menzies J), "[t]he question is necessarily one of degree and thus one of general impression based upon a common usage of ordinary language" (see also Softex Industries at 116, 119 per Ryan and Hely JJ; Jax Tyres (Full Federal Court) at 267 per Sheppard J; MP Metals at 639-640 per Windeyer J; Commonwealth v 5 Star Foods Pty Ltd (2002) 167 FLR 214 at 222).

69. Consequently, authorities, particularly those concerning other legislation (see in this regard Brennan v Comcare at 572) have little precedential value ( Softex Industries at 115; see also Jax Tyres (Full Federal Court) at 262 per Lockhart J). In MP Metals (at 637 and 639), Windeyer J disparaged the use of analogical analysis (cf Jax Tyres (Full Federal Court) at 267 per Sheppard J). However, as I have indicated, I consider that such authorities do provide guidance with respect to the meaning of the terms "manufactured" and "produced" according to ordinary usage of the kind to which Gummow J adverted in Brennan v Comcare . That much was evidently accepted by Sundberg J in Caltex when construing s 5(1) of the Tariff Act.

70. For simplicity, I shall refer to the used oil collected by the applicant to which the scheme refers as the "used oil" and to the filtered and "dewatered" used oil in issue (also referred to in the scheme as the "end product") as "fuel oil". I note, however, that the nomenclature I have employed has not affected my analysis of the relevant issues.

71. The principles I have just set out were ostensibly not in dispute in this proceeding. My reason for qualifying that statement is made apparent later in these reasons. Unsurprisingly, the applicant contended that the fuel oil was neither "manufactured" nor "produced" for the purposes of s 5(1) of the Tariff Act. The applicant contended that the fuel oil was not relevantly different in its physical characteristics from the used oil because in both cases the oils had the same hydrocarbon composition and the fuel oil had merely had some contaminants and water removed. The applicant contended further that the fuel oil was not relevantly different in its utility from the used oil, given that the used oil was capable of being used as fuel oil and was merely "enhanced" by the applicant's processes.

72. Furthermore, the applicant submitted that neither the processes of straining and filtration of the used oil nor the "dewatering" process constituted a process of manufacture. The applicant emphasised that the process by which steam was applied so as to separate water and other contaminants from the used oil merely served to accelerate the natural separation of those substances which would occur in any event over a longer period of time given their differing densities, as was evident from the activities at the Bendigo depot, where such separation occurred naturally.

73. The Commissioner contended that the fuel oil had been "manufactured" or "produced" for the purposes of s 5(1) of the Tariff Act as it was relevantly different from the used oil both in its physical characteristics and in its utility. With respect to the fuel oil's physical characteristics, the Commissioner relied upon the fact that it contained less water and contaminants than the used oil. The Commissioner accepted that the hydrocarbon composition of the fuel oil was otherwise the same as that of the used oil, but submitted that that was not determinative.

74. The Commissioner focused primarily, however, upon his contention that the fuel oil was "manufactured" for the purposes of s 5(1) of the Tariff Act because it was different from the used oil in its utility. The Commissioner properly accepted, as was necessary given the facts described in the scheme, that the used oil was "quite suitable as fuel oil" and therefore capable of being used for that purpose. The Commissioner nevertheless contended that the fuel oil had a relevantly different use from that of the used oil. The gravamen of the Commissioner's argument was revealed in his oral submissions, being that:

[t]he process is undertaken to enhance [ the used oil ], so it becomes a marketable , dare I say it , useable product ; useable from the perspective of a consumer [ Emphasis added ].

75. In my view, that contention is misconceived, because it does not pertain to the question of whether the fuel oil has been "manufactured" from the used oil according to the ordinary meaning of that word. The argument conflates perceived usefulness with actual utility. The Commissioner sought to support that contention in a manner which necessarily and impermissibly required that the statutory text be supplanted by the words of the judicial decisions upon which the Commissioner relied and, moreover, required that those words be taken out of context.

76. In his written submissions, the Commissioner submitted that the requisite difference in utility between the fuel oil and the used oil was as follows:

Here, the objective of the applicant's commercial operation is to make or produce a burner fuel that is marketable to customers, something customers are willing to buy. The process in question is " directed to producing a thing in a state fit for sale, for consumption by the end user ". The used oil when it is collected is in no such state. Were it so, there would be no need for the applicant to undertake the process it does .

77. The words quoted by the Commissioner are taken from a passage in the decision of Byrne J in Commonwealth v 5 Star Foods Pty Ltd at 222 endorsed by Sundberg J in Caltex (at 379) in the context of his consideration of the ordinary meaning of the word "manufactured". In 5 Star Foods , which concerned the standardisation of raw milk, Byrne J said in respect of the word manufacture (employed in certain Victorian excise legislation):

The cases to which I was referred also emphasise that the word should be given its meaning in ordinary everyday language . ... To my mind this meaning comprehends the application of a repetitive process, especially a mechanical process , to a thing or things to bring it or them to a form or condition specified . This process may be directed to producing a thing in a state fit for sale , for consumption by the end user , for attachment to or assembly with other things or for some further process. The process of standardisation is a process of manufacture and the person whose business it is to standardise milk is a manufacturer of dairy produce, namely, standardised milk ." [Emphasis added].

78. I do not understand this passage to suggest that improving the existing utility of goods so that they become saleable in itself amounts to a difference in their utility such that they could properly be said on that account to have been "manufactured". Given that I am mindful of Gummow J's warning given in Brennan v Comcare against construing the words of decisions as if they are statutory text (see paragraph [60]), it is perhaps idle but also quite irresistible to observe that the "thing" to which Byrne J referred in the second sentence of the quoted passage, read in context, was manifestly not the same "thing" to which he referred in the next.

79. The true question is whether the goods inherently have a different utility from that out of which they were made. As Sundberg J stated in Caltex at 380-381:

... for the purposes of s 5 of the Tariff Act , the critical question in my view is whether objectively speaking the goods in question can be said to have emerged from a process as a " new and different article ... having a distinctive character or use " ... The focus of s 5 is on the extant goods that are made subject to duty , not on the person who manufactures them or that person's stated objectives . Duty is imposed " on " goods by reference to their quality as manufactured goods. It is not imposed with any reference to the relative value of the goods or the subjective intentions of the manufacturer . This is not to say that the principle [ sic ] objectives of a commercial operation will not be relevant to the question of characterisation . They provide the context for the task of characterisation and are an important factor to take into account . They are not however determinative of the question . [Emphasis added.]

80. The Commissioner sought to rely upon Sundberg J's qualification towards the end of the quoted passage in support of his contention. However, it seems clear to me, particularly in the context of the submission being addressed in that passage and also his Honour's earlier conclusion that the residual oils in question had been "manufactured" or "produced" according to the ordinary meaning of those words (see at 378-380), that his Honour was referring to the commercial objectives in the context of the "critical question" posed, which requires that the goods have "a distinctive character or use".

81. I do not understand that decision, nor any of the other cases to which the Commissioner referred, as supporting the proposition that the goods in question need not be inherently different from that out of which they were made; indeed, quite the contrary. It might be necessary that goods be "produced for sale, commodities of commerce" in order for them to be considered to be "manufactured" according to ordinary usage ( MP Metals at 637 per Windeyer J), but it is not sufficient (ibid at 637-641). The fact that there is a market for the fuel oil but not for the used oil is not germane to the question of whether the fuel oil is a new and different article ( Jax Tyres (Full Federal Court) at 263-264 per Lockhart J; see also Jax Tyres (at first instance) per Beaumont J at 260).

82. In my view, the fuel oil is not "manufactured" nor "produced" by the applicant for the purposes of s 5(1) of the Tariff Act. It is not relevantly different from the used oil in either its physical characteristics or in its utility. Although some water and contaminants have been removed, the fuel oil is essentially the same thing as it was before. The used oil is, as described in the scheme, "quite suitable as fuel oil". The fuel oil has not been "brought into useable form"; rather, it is merely better able to be used for the same purpose (cf Caltex at 379-380). Nor has it been restored to any different utility it had before it became used oil, such as for use in an internal combustion engine.

83. I do not consider that the fact that the fuel oil has had some water and some other contaminants removed constitutes a relevant difference between the fuel oil and the used oil in terms of their essential physical characteristics (see MP Metals at 638). The fuel oil is of the same chemical nature as the used oil in terms of its hydrocarbon composition (cf Caltex , which concerned a comparison between crude oil and its residuum, at 379-380). The fuel oil merely contains less water and other extrinsic impurities than the used oil (see Attorney-General v Colonial Sugar Refining Company Ltd (1900) 26 VLR 83). Nevertheless, it is waste oil before it undergoes treatment and remains waste oil afterwards (see McNicol v Pinch [1906] 2 KB 352 at 358, 360; MP Metals at 649-650 per Menzies J; Jax Tyres (Full Federal Court) at 261 per Beaumont J).

84. I consider that, upon a comparison of the fuel oil and the used oil, in terms of "ordinary everyday language" (see 5 Star Foods at 222) one would not naturally refer to the former as having been manufactured from the latter (see also MP Metals at 639-40 per Windeyer J). Rather, by straining, filtering and "dewatering" the used oil, the applicant merely adapts waste for sale ( M P Metals at 640-41 per Windeyer J, at 649-50 per Menzies J).

85. It is instructive to refer by way of illustration to the High Court's decision in MP Metals , which concerned the processing of scrap metal. The taxpayer collected scrap metal, cut it into sizes suitable for buyer's requirements and pressed it into bales so that it was more suitable for use in foundry furnaces. Windeyer J concluded (at first instance, at 640-641):

" I do not doubt that what the taxpayer in the present case does is adapting scrap for sale . ...

I am unable to accept the view that by treating the scrap it collected as it did the taxpayer derived from it manufactured goods .... These operations did not create a thing having a new industrial use ; and according to what seem to me the ordinary usages of the language of commerce, the processed scrap is not manufactured goods ."

86. After referring to a comparison between the collected scrap and the baled scrap, on appeal to the Full Court, Menzies J said (at 649-650):

The scrap is still scrap. True after baling the scrap is in a form in which it can be handled or used to charge furnaces, but what has happened is not that manufactured goods have been derived from old, rather it is that manufactured goods have been brought into a condition in which they can be sold or used . .... The baling process seems to me to be a process of bringing goods into a form for sale or use rather than a process of manufacture .

87. I now turn to consider the applicant's submission that the fuel oil is not "manufactured" (nor "produced") for the purposes of s 5(1) of the Tariff Act because the processes applied to the used oil by the applicant do not constitute processes of manufacture. As is apparent from my reasons above, I accept the Commissioner's submission that the critical question is whether the fuel oil is relevantly different from the used oil in terms of its physical characteristics or utility, not whether the applicant's processes may properly be characterised as manufacturing processes ( Jax Tyres (Full Court) at 267 per Sheppard J; see also at 263-264 per Lockhart J; see Jax Tyres (at first instance) at 260 per Beaumont J; MP Metals ). The fact that the applicant's processes are relatively unsophisticated, in that they merely involve straining and filtering the oil and using heat to accelerate the natural separation of the oil from water and suspended contaminants, perhaps has some bearing as a matter of fact upon whether the fuel oil is relevantly different from the used oil, but it is not the determining factor.

88. The fact that the "dewatering process" is undertaken to meet customers' requirements with respect to the amount of suspended moisture in the fuel oil does not alter my conclusion that the fuel oil is not "manufactured" nor "produced" by the applicant for the purposes of s 5(1) of the Tariff Act. Again, that fact does not bear upon the question of whether the fuel oil is relevantly different from the used oil (see Jax Tyres at first instance; Jax Tyres (Full Court); Softex Industries ; MP Metals ). Nor does the fact that there are environmental and safety regulations governing the fuel oil (see Jax Tyres (Full Court) at 259 per Lockhart J). Likewise, the fact that the applicant tests the fuel oil in order to ascertain whether those customer requirements with respect to moisture content and the regulatory requirements are met does not, in my view, bear upon the critical question.

89. As I have indicated (in paragraph [45]), even if the facts constituting the scheme set out in the ruling had reflected the additional information provided after the ruling was made concerning the Southern Oil specifications and the specifications for the Waste Oil Kiln Fuel and the related external testing, that would not have altered my conclusion that the fuel oil is not "manufactured" or "produced" according to the ordinary meaning of those words, for the reason I have just explained.

90. I wish to make a final comment about the meaning of the terms "manufactured" and "produced" in s 5(1) of the Tariff Act. Although there was little focus on the definition of the word "manufacture" in s 4 of the Excise Act, I should explain why it does not alter my conclusion that the fuel oil has not been "manufactured" or "produced" for the purposes of s 5(1). I note that the Commissioner relied upon this definition (merely) to counter the applicant's submissions to the extent that they focussed particularly on the "dewatering" process (see paragraph [98]), in support of the proposition that the applicant's processes are to be considered "holistically". As I have said, I accept the Commissioner's submission that the true question is whether the goods possess the requisite difference from that out of which they are made, not whether the processes by which they are made may properly be characterised as manufacturing processes.

91. The inclusive definition of the word "manufacture" in s 4 of the Excise Act extends the meaning of the word beyond its ordinary meaning (see Sherritt Gordon Mines Ltd v Federal Commissioner of Taxation [1977] VR 342 at 353, Dilworth v Commissioner of Stamps [1899] AC 99 at 105-106). However, in my view that definition serves a somewhat different purpose which is not relevant to the issues before the Tribunal. Division I of Part III of the Excise Act restricts the "manufacture" of excisable goods - only licensed manufacturers may manufacture excisable goods, and they must do so in accordance with the Act and the licence. In my view, the definition of the word "manufacture" serves to extend the application of those requirements to those who undertake processes in the manufacture of excisable goods. Furthermore, it thus extends liability to pay excise duty. Section 54 of the Excise Act provides that a licensed manufacturer of excisable goods or, where the owner of excisable goods enters them for home consumption, the owner of the goods, is liable to pay excise duty.

92. Nevertheless, the question posed by s 5(1) of the Tariff Act is whether the goods in question have been "manufactured" or "produced". Section 5(1) imposes excise duty directly on relevant goods "as the 'subjects of manufacture' ... The impost is ... a tax upon the step of manufacturing or producing a defined good" ( Caltex at 384-385 per Sundberg J, endorsing Matthews v Chicory Marketing Board (Vic ) (1938) 60 CLR 263 at 303-304; see also Ha v State of New South Wales (1997) 189 CLR 465 at 499). As is evident from the reasoning of Sundberg J in Caltex , that question is to be answered according to the ordinary meaning of those words.

Item 10(d) of the Schedule

93. In case I am wrong in my conclusion that the fuel oil is not "manufactured" or "produced" for the purposes of s 5(1) of the Tariff Act, I now turn to consider the other requirement of that provision, being that the goods are dutiable under the Schedule to that Act. As I have said, the issue in this proceeding is whether the fuel oil is properly characterised as "liquid hydrocarbon products derived through a recycling, manufacturing or other process" within the terms of Item 10(d) of the Schedule.

94. The applicant accepted that the fuel oil is a "liquid hydrocarbon product" and also accepted that its activities constitute "recycling" processes as ordinarily understood. However, the applicant contended that the fuel oil could not properly be said to be "derived" through such processes according to the ordinary meaning of that word. The word "derived" is relevantly defined in the Macquarie Dictionary to mean "to come from a source; originate" ... and in the Shorter Oxford English Dictionary to mean "Freq. in pass ., arise, be descended, be formed, originate from ".

95. The Commissioner's submissions about whether the fuel oil had been "manufactured" or "produced" and whether it was dutiable under the Schedule for the purposes of s 5(1) of the Tariff Act were essentially intertwined. In his oral submissions, the Commissioner emphasised that, read in the context of s 5(1), Item 10(d) envisaged that goods derived from a recycling process might also be "manufactured" or "produced" for the purposes of s 5(1). That much may be accepted, even though Item 10(d) employs the term "recycling" in apparent contradistinction to the term "manufacturing". The Commissioner also submitted that the applicant's processes constituted "manufacturing" processes for the purposes of Item 10(d), on the basis that they had been "manufactured" for the purposes of s 5(1).

96. As was common ground between the parties, the resolution of the issue of whether the fuel oil satisfied Item 10(d) turned on whether it could properly be said to emerge from the applicant's processes as a new and different article, being the same factual question governing whether it could properly be said to have been "manufactured" or "produced" for the purpose of s 5(1) of the Tariff Act (see also the use of the word "derived" by Menzies J in MP Metals (on appeal) at 649).

97. In my view, for the reasons I have given in the latter context, the fuel oil cannot properly be said to be have been "derived" through the applicant's processes according to the ordinary meaning of that word. Accordingly, the fuel oil is not dutiable under Item 10(d) of the Schedule to the Tariff Act.

OTHER COMMENTS

98. There was considerable emphasis placed in the applicant's submissions upon the contrast between the Commissioner's favourable treatment of the applicant's activities at its Bendigo depot and its unfavourable treatment of the fuel oil in issue. It appears from the reasons accompanying the notice of private ruling and also from the questions posed in the ruling that the Commissioner's opinion expressed in the ruling with respect to the fuel oil turned on the stated fact that steam was applied to heat the used oil. However, the Tribunal is concerned with the correctness of the ruling, not the process of reasoning by which it was made. As Gilmour J said in Cooperative Bulk Handling at [13] with respect to the onus in an appeal against an objection decision (s 14ZZO(b)(iii)) of the TAA), which is materially in the same terms as that in s 14ZZK(b)(iii):

The onus on the applicant is to satisfy the Court that the Commissioner's opinion on the application of the law to the specified scheme is incorrect . ...[ T ] his onus is not discharged by putting in issue the Commissioner's explanation of his opinion on the application of the law. The explanation accompanying his ruling is stated not to form part of the ruling. The way the explanation is expressed does not determine the correctness of the Commissioner's ruling on the application of the law. What is relevant is the proper application of the law to the specified scheme .

(See also Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614.)

CONCLUSION

99. As the fuel oil does not constitute goods in respect of which excise duty is imposed pursuant to s 5(1) of the Tariff Act, the ruling is incorrect. The first question asked in the notice of ruling should have been answered negatively.

100. The Tribunal will set aside the objection decision and allow the objection in full, so that the private ruling is altered by substituting the words "No, you are not manufacturing excisable goods at your Melbourne depot within the meaning of section 4 of the Excise Act" for the words used in the answer to the first question stated in the notice of private ruling.

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