FEDERAL COURT OF AUSTRALIA

David Mitchell Ltd and Anor v Chief Executive Officer of Customs

[2001] FCA 294

Spender, Marshall and Gyles JJ

23 March 2001 - Melbourne

Marshall J. 52 This is an appeal from the judgment delivered on 19 November 1999 by a single Judge of the court (the primary Judge, Ryan J in Chief Executive Officer of Customs v David Mitchell Ltd [1999] FCA 1611 ; (1999) 43 ATR 191 ). The judgment concerned an application made by the present respondent to review a decision of the Administrative Appeals Tribunal (the AAT; AAT Case 12,603 (unreported, Cth AAT, McDonald member, V96/607, 9 February 1998) .

53 Pursuant to s 78A(1) of the Excise Act 1901 (Cth) and s 164(1) of the Customs Act 1901 (Cth), a person who purchases diesel fuel for use in mining operations, on which duty has been paid, is entitled to payment of a rebate.

54 In May 1996, a delegate of the respondent (the delegate) refused to pay diesel fuel rebate on diesel fuel purchased by the first appellant, David Mitchell Ltd (DML), for the excavation and processing of limestone. In October 1996, a similar decision was made in respect of the operations of the second appellant, Loongana Lime Pty Ltd (Loongana).

55 Subsequent to the decision of the delegate of May 1996 and prior to the decision of the delegate of October 1996, the Customs Act 1901 (Cth) was amended. At the time of the delegate ' s decision in October 1996, "mining operations" was defined in s 164(7) of the Customs Act 1901 (Cth) (which now appears in an immaterially amended form) to mean, so far as is presently relevant:

(a) exploration, prospecting, or mining for minerals, or the removal of overburden and other activities undertaken in the preparation of a site to enable mining for minerals to commence; or

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

56 Also in s 164(7) of the Customs Act 1901 (Cth) (as amended), "minerals" is defined to mean:

minerals in any form, whether solid, liquid or gaseous and whether organic or inorganic, except:
(a) sand, sandstone, soil, slate, clay (other than bentonite or kaolin), basalt, granite, gravel or water; or

(b) limestone (other than agricultural use limestone).

57 In the case of DML, the delegate found that DML was extracting and processing limestone. Consequently, no diesel fuel rebate was payable as "mining for minerals" under the Customs Act 1901 (Cth) did not include mining for limestone. In the case of Loongana, the delegate found that Loongana was in the business of chemically manufacturing quicklime from limestone for use in the gold mining industry. The delegate also said that:

[Loongana ' s] operation is not to win anything having a characteristic of a kind which ordinary understanding would describe as a mineral. There is nothing to indicate that [Loongana] is recovering any specific mineral or minerals embedded in or intermixed with the limestone.

58 The appellants sought a review of each adverse decision in the AAT. On 9 February 1998, the AAT set aside the decisions of the delegate and remitted the matter to the respondent "for reconsideration in accordance with the direction that diesel fuel rebate be assessed for payments in accordance with the findings of the Tribunal" .

59 In its reasons for decision at [6] thereof, the AAT observed that the provisions of the Customs Act 1901 (Cth) which provide for the diesel fuel rebate "are beneficial in nature" and "designed to promote and encourage … mining activity" . Consequently, it was held that the relevant provisions of the Customs Act 1901 (Cth) should not be narrowly construed.

60 The AAT also observed that the extraction methods of DML and Loongana were "substantially the same" . They were described in the following way by the AAT (at [7]):

In each case the operations involve the removal of overburden, the extraction of limestone by use of open - cut mine benching system, involving drilling and blasting, removing the limestone and crushing it to a size suitable for calcining (heating). The crushed ore is screened and good quality, suitably sized material is fed into a kiln and subjected to a temperature of approximately 1000 degrees centigrade for five or more hours.

61 At its Lilydale site in Victoria, DML processes limestone which is sold for various uses including aglime, stock feed manufacture, soil improvement, market gardening and industrial filler in the case of good quality limestone; and as "toppings" for pathways, driveways and car parks, or as crusted rock in the case of poor quality limestone. At its Western Australian goldfields site, Loongana processes high quality material only.

62 The AAT held at [17] of its reasons for decision that "the purpose of the extraction process is to obtain the mineral calcite" . At [29], the AAT said that:

On the balance of the evidence submitted, the Tribunal finds that … the limestone at the applicant ' s sites at Lilydale and Loongana is properly described as an ore which is mined at those two locations.

63 At [48], the AAT found that:

… lime is a mineral for the purposes of the Act.

64 At [54], the AAT reiterated that:

… limestone is an ore which is mined at Lilydale and Loongana and, therefore, properly subject to activities falling within the definition of mining operations.

65 The AAT went on to add that:

The term limestone may be used when referring to the material fed to the kiln but in fact it is the mineral calcite; its true and accurate description is, for example, "97.2% pure calcite" . What is recovered in this integrated operation is not limestone but lime.

66 At [56], the AAT said that:

The purpose of the mining operations is to recover lime, the elements of which are present in the calcite as mined.

67 The primary Judge granted the application for review, set aside the decision of the AAT, and ordered that the decisions refusing the rebate be reinstated in respect of DML and Loongana.

68 The primary Judge applied the reasoning of Heerey J at first instance in Chief Executive Officer of Customs v Goliath Portland Cement Co Ltd [1999] FCA 666 at [25], (1999) 42 ATR 189 at 193; 99 ATC 4825 at 4829 thereof where Heerey J said:

If "limestone" has been expressly excluded from the statutory definition of "minerals" it seems to me to follow inexorably that the essential and defining component of limestone, namely calcite, must also be excluded. One cannot mine for calcite without mining for limestone, and vice versa.

69 At [37] (ATR 200-01) of his reasons, the primary Judge said that:

… I consider that the activities at Lilydale and Loongana are properly characterised as the recovery of limestone. It is true that calcite is the commercially valuable constituent of limestone but that does not entail that limestone is an ore of calcite. As I understand the process, nothing is done to separate calcite from the limestone before the limestone is fed into the kilns to produce lime. … Accordingly, I have concluded that the Tribunal erred in holding the total integrated process to the completion of calcination included dressing and beneficiation for the recovery of a mineral other than limestone.

70 The present appeal was heard on 9 May 2000. On that day, the full court reserved its judgment. On 22 August 2000, another full court delivered its reasons for judgment in an appeal from Heerey J: see Goliath Portland Cement Co Ltd v Chief Executive Officer of Customs [2000] FCA 1164 , (2000) 101 FCR 11; 45 ATR 96 .

71 The following points were fundamental to the reasoning of the full court in Goliath:

• central to the phrase "mining operations" in s 164(7) of the Customs Act 1901 (Cth) is the notion of the recovery of minerals (see at [24]; FCR 17-18; ATR 102-3);

• in construing that phrase one focuses on "the end product" which is "the object of the operations undertaken" (which was, relevantly, cement) (see at [24]; FCR 17; ATR 102);

• a mineral must be "present when the material in which it is contained [is] taken from the earth" (see at [28]; FCR 18; ATR 103);

• the full court critically held that (at [28]; FCR 18; ATR 103):

It is … highly artificial to speak of lime being "recovered" … because it was possible to physically remove it. This is not and could not be undertaken in this process, the manufacture of cement;

• all that was intended by the exclusion of "limestone" was the exclusion of "limestone as such" . "(I)t was not intended to refuse rebate where a mineral within the stated minerals was sought to be recovered" (see at [30]; FCR 19; ATR 104).

72 After the delivery of judgment in Goliath, this full court received written submissions from the parties in the present appeal. Neither party sought to submit that Goliath was incorrectly decided. In my view, at the very least, the reasoning of the full court in Goliath is not "clearly erroneous" ; see Transurban City Link Ltd v Allan [1999] FCA 1723 , (1999) 95 FCR 553 per Black CJ, Hill, Sundberg, Marshall and Kenny JJ, at [29] (FCR 560).

73 In the written submissions filed on behalf of DML and Loongana, it was said that:

… if one applies the reasoning of the Full Court in Goliath to the present case and accepts as the Full Court in Goliath did that the statutory exclusion of limestone does not include calcite or lime, one is led to the conclusion that the appeals should be allowed. The end product sought by the relevant operations in the present appeals is lime, this is the recovered mineral which is useful and saleable. It is therefore not artificial, as in the Goliath case, but entirely natural in the present case to speak of lime as being "recovered" .

74 The respondent ' s written submissions conceded that Goliath "may be distinguished … so far as it turns on the factual finding in that case that the "desired end product" of a "continuous process of manufacture" was cement" . The respondent also accepted that in the present case the "desired end product of a continuous process of manufacture was lime" . However, the respondent challenged the AAT ' s finding that "lime is a mineral" for the purpose of rebate on 2 grounds. First it was said that the AAT ' s reasoning is premised on the erroneous view that "limestone is a s 164 mineral" and second, that the lime obtained was not, as the AAT assumed, "the product of a process of ' mining for minerals ' but the product of a process of ' manufacture ' " .

75 The AAT ' s views on limestone being a mineral for the purposes of s 164 of the Customs Act 1901 (Cth) cannot distract the court from its task of asking what was the desired end product of each process at Lilydale and Loongana. The desired end product was lime. Lime is a mineral. That was a question of fact for the AAT to determine. I see no basis for interfering with that finding of fact. The entire process (other than the dressing and beneficiation) was one which resulted in the production of lime as a consequence of mining material from the ground, ie a mining operation.

76 I see no merit in the submission of the respondent that the process, in reality, was one of manufacturing rather than one of mining. In my view, for the foregoing reasons, the primary Judge erred in holding that the AAT had wrongly determined that rebate was payable.

77 I would make the following orders:

1. The appeal be allowed.

2. The orders of the primary Judge of 19 November 1999 be set aside.

3. The decision of the Administrative Appeals Tribunal of 9 February 1998 be affirmed.

4. The respondent pay the appellants ' costs of the appeal and their costs of the hearing before the primary Judge of the appeal from the Administrative Appeals Tribunal.