These steel rails were the property of the New South Wales Government, and were being imported for the purposes of the New South Wales government railways.

As to this first ground, the argument for the plaintiff is wholly founded on certain doctrines adopted, and certain expressions used, by this Court in previous decisions. But for these doctrines and expressions I should not, personally, feel any difficulty with regard to the first ground. If it were open to me to do so, I confess I should like to reconsider the doctrine, or the limits of the doctrine, that there is to be implied from the Constitution any such prohibition of taxation as is asserted in D'Emden v. Pedder[45] and in the subsequent cases; and I should also like to reconsider the doctrine that the railways are a State governmental function - I mean, a strictly governmental function, in the same sense as the legislature, the executive and the judiciary are governmental functions. I am emboldened to express my doubt as to these doctrines because the Privy Council by its Judicial Committee has condemned the former doctrine. But I bow to the opinion of the majority of my learned colleagues, both as to these doctrines themselves, and as to the further doctrine that the Privy Council is in an appeal from the High Court "bound to accept and follow" the decision of the High Court with regard to a constitutional point of the nature referred to in sec. 74 of the Constitution: see Baxter v. Commissioners of Taxation (N.S.W.)[46]. My judgment in this case, therefore, must assume that these doctrines are, in their application hitherto, unimpeachable. But the doctrine as to the exemption of State agencies from Commonwealth taxation has never yet been applied to Customs taxation, taxation of the act of importation, as distinguished from internal taxation. It has never yet been applied so as to make an exception to the exclusive and paramount power of the Commonwealth Parliament to make laws with respect to trade and commerce with other countries, and with respect to Customs taxation (sec. 51 (I.) (II.); sec. 90). For the reasons which I have stated in The King v. Sutton[47] I regard the doctrine as to the King not being bound save by express words, as being inapplicable as between the States and the Commonwealth, at all events in the exercise of an exclusive power of the Commonwealth; and I regard State laws and State powers in respect of the railways as subordinated to the Commonwealth powers with regard to trade and commerce, and with regard to Customs taxation.

But the interpretation of sec. 114 of the Constitution raises another difficulty. The section itself mixes up two distinct subjects. It forbids a State to raise a naval or military force without the consent of the Commonwealth Parliament; and it forbids a State to impose a tax on property of any kind belonging to the Commonwealth. Then, apparently, it occurred to the draughtsman that a similar prohibition should be inserted against the Commonwealth taxing State property. The prohibition as to State taxation was, no doubt, suggested by the British North America Act, sec. 125. But by substituting the word "property" for "lands or property," the intention - if it was the intention - to confine the prohibition to what are known as "property taxes" has been somewhat obscured. Property is, by the Constitution, subject to be taxed at the instance of the State as well as of the Commonwealth; Customs taxation is solely a matter for the Commonwealth (sec. 90). Taxes of retaliation, as between the States and the Commonwealth, are possible as to property taxes; but are impossible as to Customs taxes. But whatever may have been the motive which led to this express prohibition, in addition to the prohibition which this Court has held to be implied from the nature of the Constitution as to the taxation of State or Commonwealth agents, the phraseology is such as to point to taxation of property as property as being the subject of this express prohibition. "A State shall not, without the consent of the Parliament or the Commonwealth, ... impose any tax on property of any kind belonging to the Commonwealth, nor shall the Commonwealth impose any tax on property of any kind belonging to a State." But is a Customs tax a tax on property as such? The Customs Tariff 1902 speaks of "duties ... on ... goods," and the expression is roughly accurate, although, probably, if fully expressed it would be a tax on persons in respect of the importation of goods; just as a property tax is usually, though not necessarily, a tax on persons in respect of their property. A Customs tax is a tax, not on property as such, but on persons in respect of the act of importation. There is a fundamental difference between taxing men for having property, and taxing men for moving property - and, in particular, for moving property into the country from over seas. A turnpike toll, or an octroi tax, is not, properly speaking, taxation "imposed on property," although the person who moves the animals or goods through the gate or into the city has to make a payment based on the number or character or value of the things which enter. Unless they enter, there is no tax; if they enter, there is a tax - which has to be paid by the person who brings them in, whether he is the owner or not. In other words, it is not a "property tax." The case of succession taxes in the United States is analogous. Congress cannot, according to the doctrine of M'Culloch v. Maryland[48], tax State agencies; but it can tax a bequest of money or a devise of land to the State. It can tax the movement from the dead hand into the hand of the State: Snyder v. Bettmann[49]. Another analogy may be found in the distinction between taxation by a State of United States bonds, the property of a corporation, and taxation levied on the franchise or business of the corporation; although the amount of the tax may depend on the value of the bonds in each case: Home Insurance Co. v. New York[50].

Again, if the Commonwealth were to impose a property tax on Australian residents everywhere, based on the value of their property everywhere (for the present purpose I may assume - without deciding it - that such a tax would be valid), the tax would fall on them in respect of goods even in London. But when the Commonwealth imposes a Customs duty, the duty is not payable unless it be attempted to move the goods from London to Australia.

I prefer to base my judgment on this ground which I have stated. I cannot, confidently, take the ground that a Customs duty cannot be a tax within the meaning of the word "tax" in sec. 114. It is true that "duties of Customs" and "duties of Excise" are the usual expressions; but phraseology, such as is used in sec. 55, shows that the Constitution treats the imposing of such duties as being the imposing of taxes: "Laws imposing taxation, except laws imposing duties of Customs or of Excise, shall deal with one subject of taxation only." However, the fact that sec. 114 uses the mere word "tax" - not "tax of any kind," although it speaks of "property of any kind" - strengthens the view that the framers of the section could not have had Customs duties in their minds at the time. They lay the emphasis on the thought on ownership - "property of any kind belonging," &c.

I have based my reasoning on the words and the scheme of our own Australian Constitution. But it is a fact not to be ignored, that the plaintiff's counsel have not been able to point to any indication (to say the least) that in the United States or in Canada the separate States, or Provinces, are exempted from Customs taxation; although it is from the United States that this Court has adopted the doctrine as to the exemption of State agencies, and although the Canadian Constitution contains the section from which our sec. 114 is derived.

For the reasons which I have stated, I concur in the opinion that the States of Australia are liable to the payment of duties of Customs; that sec. 114 of the Constitution does not exempt them; that the duty was properly paid on the steel rails in question; and that judgment should be entered for the defendant with costs.

Solicitor, for the plaintiff, The Crown Solicitor for the Commonwealth.

Solicitor, for the defendant, The Crown Solicitor for New South Wales.

[1] [1908] HCA 26; 5 C.L.R., 789.

[2] [1905] USSC 184; 199 U.S., 437.

[4] [1908] HCA 26; 5 C.L.R., 789.

[6] [1896] USSC 184; 163 U.S., 625.

[7] [1896] USSC 184; 163 U.S., 625, at p. 629.

[9] [1876] USSC 202; 94 U.S., 315.

[10] [1896] USSC 184; 163 U.S., 625, at p. 629.

[11] (1903) 3 S.R. (N.S.W.), 115.

[12] [1904] HCA 1; 1 C.L.R., 91.

[13] [1907] HCA 76; 4 C.L.R., 1087, at p. 1132.

[15] [1904] HCA 1; 1 C.L.R., 91.

[17] [1908] HCA 26; 5 C.L.R., 789.

[18] [1904] HCA 1; 1 C.L.R., 91, at p. 111.

[20] [1905] USSC 184; 199 U.S., 437, at p. 448.

[21] [1827] USSC 36; 12 Wheat., 419.

[22] [1908] HCA 26; 5 C.L.R., 789.

[23] [1904] HCA 1; 1 C.L.R., 91.

[25] [1904] HCA 1; 1 C.L.R., 91, at p. 111.

[27] [1908] HCA 26; 5 C.L.R., 789.

[29] [1904] HCA 1; 1 C.L.R., 91, at p. 109.

[30] [1904] HCA 1; 1 C.L.R., 91.

[31] [1908] HCA 26; 5 C.L.R., 789.

[35] (1903) A.C., 478, at p. 481.

[36] [1827] USSC 36; 12 Wheat., 419.

[38] [1827] USSC 36; 12 Wheat., 419.

[39] [1904] HCA 1; 1 C.L.R., 91.

[41] [1904] HCA 1; 1 C.L.R., 91.

[43] [1905] USSC 184; 199 U.S., 437.

[44] 4 C.L.R., 488, at pp. 538-9.

[45] [1904] HCA 1; 1 C.L.R., 91.

[46] [1907] HCA 76; 4 C.L.R., 1087, at pp. 1100, 1116.

[47] [1908] HCA 26; 5 C.L.R., 789.

[48] [1819] USSC 5; 4 Wheat., 316.

[49] [1903] USSC 167; 190 U.S., 249.

[50] [1886] USSC 217; 119 U.S., 129.