Bath v Alston Holdings Pty Ltd

Question: by reason of s. 92 of the Constitution are ss. 6(2), 8(1), 9(1)(a), 9(2), 9(3), 10(1)(c) and 10(1)(d), 10(2), 10(3) and 19A(1)(d) of the Act inapplicable to sales of tobacco products by the defendant in the State of Victoria in the manner referred to in the statement of agreed facts?

Order that the costs of the proceedings in this Court be paid by the plaintiff. Order that the matter be remitted to the Supreme Court of Victoria to be disposed of in accordance with the judgment of this Court and for appropriate orders as to costs in the proceedings in that court.

1988, June 7 Mason C.J., Brennan, Deane and Gaudron JJ.

In this matter the Court is called upon to determine certain questions reserved by the Chief Justice for its consideration pursuant to s. 18 of the Judiciary Act 1903 Cth upon facts agreed by the parties. The plaintiff, Susan Bath ("the Commissioner"), is the Commissioner of Business Franchises pursuant to the Business Franchise (Tobacco) Act 1974 Vict ("the Act"). The Commissioner commenced proceedings in the Supreme Court of Victoria against the defendant Alston Holdings Pty. Ltd. ("Alston") seeking an injunction restraining Alston from selling tobacco otherwise than pursuant to a licence granted under the Act. It is common ground that Alston sold tobacco by retail without a licence under the Act. Alston relied on s. 92 of the Constitution as a defence to the proceedings, contending that such sales as it made in Victoria were made in the course of interstate trade and commerce and that the effect of s. 92 is either to invalidate the relevant provisions of the Act or to render them inapplicable to the sales of tobacco made by Alston in Victoria. The proceedings were removed into this Court pursuant to s. 40 of the Judiciary Act.

Alston, which is a company incorporated in New South Wales, occupied and carried on business as a tobacco retailer at premises at Dandenong and Geelong in Victoria. By an application dated 31 October 1986 Alston applied for a retail tobacconist's licence, specifying in its application that the premises in respect of which the licence was sought were the Dandenong and Geelong premises. By an assessment of the licence fee dated 3 November 1986 the Commissioner informed Alston that its application was subject to payment of a licence fee in the sum of $176,801.75. By an amended assessment of the licence fee dated 11 November 1986 the Commissioner informed Alston that its application was subject to payment of an amended licence fee in the sum of $31,090.67. Each assessment was based on an assessment by the Commissioner, pursuant to s. 10(3) of the Act, of all tobacco that would have been handled by Alston at the premises had it held a retail tobacconist's licence in the relevant period before the application. Alston has not paid any part of the sum assessed and has not tendered payment of any part save for the sum of $10 in respect of the Dandenong and $10 in respect of the Geelong premises. No licence issued to Alston in respect of either of the premises.

On 19 January 1987 Alston purchased from I.C.P. Tobacco Wholesalers tobacco products having a net invoice value of $26,607.48. The purchase of these tobacco products took place at I.C.P. Tobacco Wholesalers' premises at Salisbury in Queensland, and was made orally "on the spot" by a sales representative on behalf of the seller and Mr. Leask on behalf of Alston. The price was paid in cash at the time of sale by Mr. Leask. Delivery was made contemporaneously to Mr. Leask of the tobacco products in shippers and half-shippers, being large sealed containers which in turn contained sealed cartons comprising packets of individual cigarettes. The tobacco products were purchased by Alston for the purpose of transporting them to and selling them by way of retail sale at the Dandenong and Geelong premises in the manner to be described below.

Alston, having taken possession of the tobacco products upon delivery, transported them by truck from the seller's premises to I.P.E.C. Transport's depot in Salisbury where they were loaded into large crates called pallecons and consigned to I.P.E.C. Transport's depot in Melbourne. It seems that some of the tobacco products were loaded into pallecons prior to transportation to I.P.E.C. Transport's Brisbane depot. I.P.E.C. Transport, which is a substantial carrier of goods for reward throughout Australia, was engaged by Alston for the purpose of carrying the tobacco products from I.P.E.C. Transport's Brisbane depot to its Melbourne depot. On the arrival of the tobacco products in Melbourne, Mr. Quick, who was engaged by Alston to collect them, transported them to the Dandenong and Geelong premises.

By a large number of retail sales Alston sold the tobacco products in Victoria from the premises at Dandenong and Geelong to members of the public within the period from 21 January to 6 February 1987. Since 9 December 1986 Alston has carried out other transactions involving the purchase by it of cigarettes and other tobacco prepared for consumption outside Victoria, the carriage of those tobacco products to Victoria and the retail sale of those products in Victoria from the Dandenong and Geelong premises to members of the public being in all material respects similar to the transactions already described. Since 9 February 1987 all of Alston's stock of cigarettes at the Dandenong and Geelong premises has been purchased in the manner already described. It is agreed that unless enjoined by a court from doing so, Alston intends to sell in Victoria tobacco purchased by it outside Victoria without holding a licence under the Act.

The questions reserved for the consideration of the Full Court are as follows:

1. Are ss. 6(2), 8(1), 9(1)(a), 9(2), 9(3), 10(1)(c) and 10(1)(d), 10(2), 10(3) and 19A(1)(d) of the Act invalid as being contrary to the provisions of s. 92 of the Constitution?

2. By reason of s. 92 of the Constitution are ss. 6(2), 8(1), 9(1)(a), 9(2), 9(3), 10(1)(c) and 10(1)(d), 10(2), 10(3) and 19A(1)(d) of the Act inapplicable to sales of tobacco products by the defendant in the State of Victoria in the manner referred to in the statement of agreed facts?

The judgment which the Court recently delivered in Cole v. Whitfield [1] disposes of so much of Alston's case as was based on the submission that the imposition of the liability to pay a retailer's licence fee constituted a burden on Alston's interstate trade in tobacco products and was therefore necessarily invalid unless it could be justified as mere regulation. This leaves for consideration the defendant's submission that the provisions of s. 10(1)(c) and (d) contravene s. 92 in that the fiscal charges which they purportedly impose relevantly discriminate against interstate trade. In order to consider this aspect of the defendant's case we must examine the structure of the Act and the relevant provisions.

By s. 2(1), the expression "Tobacco retailing" is defined to mean "the business of selling tobacco by retail in Victoria either alone or in conjunction with any other merchandise and includes such business carried on as part of or in conjunction with any other business".

A person shall not on or after 1 July, 1975 carry on tobacco retailing unless he is the holder of a retail tobacconist's licence under this Act.

In addition to that penalty the court may order the offender to pay to the Commissioner double the amount that would have been payable as a licence fee if a licence had issued: s. 6(3).

Section 7 makes provision for application for licences under the Act, including a retail tobacconist's licence. The Commissioner shall issue a licence to an applicant where a fee has been paid which is, in the opinion of the Commissioner, the fee required to be paid under the Act: s. 7(3). However, where the Commissioner is of the opinion that an amount paid or tendered by an applicant as a licence fee is less than the licence fee which is required to be paid the Commissioner may refuse to issue a licence until the fee required to be paid has been paid: s. 7(3A). The licence shall specify the premises which are to be used for or in connexion with the business carried on under the licence: s. 7(4). A person who has applied for a licence shall pay the fee required to be paid for the licence: s. 7(7).

On or after the 1st day of July, 1975 a person shall not sell tobacco in Victoria unless he is the holder of a licence under this Act.

In addition to that penalty the court may order the offender to pay to the Commissioner double the amount that would have been payable as a licence fee if a licence had issued: s. 8(1A). A licensee who carries on a business of tobacco retailing or tobacco wholesaling on premises which are not specified in the licence as premises to be used for that business is guilty of an offence: s. 8(3).

A licence shall be in the prescribed form and shall -

(a) in the case of a retail tobacconist's licence, except as otherwise provided in sub-section (2);

be in force on and from the day specified in the licence as the date from which the licence commences until, unless it sooner ceases to have effect, the last day of the month in which it commenced. Sub-section (2) provides: The Commissioner may in his absolute discretion issue to a person who has applied for a retail tobacconist's licence a licence revocable at will which unless so revoked or otherwise ceasing to have effect shall be in force on and from the day specified in the licence as the date from which the licence commences until 31 December next following. If the licence is revoked it is deemed to continue in force only until the end of the month in which it was revoked: s. 9(3)(a).

The fees to be paid for licences issued under this Act shall be as follows:

(c) For a retail tobacconist's licence revocable at will issued pursuant to section 9(2) a fee of $50 together with an amount equal to 25 per centum of the value of tobacco sold by the applicant in the course of tobacco retailing in the relevant period (other than tobacco purchased in Victoria from the holder of a wholesale tobacco merchant's licence or a group wholesale tobacco merchant's licence).

(d) For a retail tobacconist's licence of the duration specified in section 9(1) a fee of $10 together with an amount of 25 per centum of the value of tobacco sold by the applicant in the course of tobacco retailing in the relevant period (other than tobacco purchased in Victoria from the holder of a wholesale tobacco merchant's licence or a group wholesale tobacco merchant's licence).

Sub-section (2) provides: The value of tobacco sold for the purpose of sub-section (1) shall be determined by the Commissioner as 100/125 of the gross amount (including any duties thereon) for which in his opinion it would ordinarily be expected to be purchased by persons engaged in tobacco retailing. Sub-section (3) provides: Where an application is made for a retail tobacconist's licence and the applicant did not carry on the business of a retail tobacconist at all of the premises specified in the application for the whole of the relevant period, the fee payable by the applicant in respect of the licence shall be such amount as is assessed by the Commissioner as being just and reasonable in the circumstances of the case having regard to the tobacco that would have been handled by the applicant had he been carrying on the business in respect of which the application for the licence was made at all of those premises for the whole of the relevant period, the relevant principles of determining fees under sub-section (1) and the period that the licence, if granted, will be in force. The value of any tobacco sold for delivery and consumption outside the State should be disregarded in determining the fees payable: s. 10(6). Where a person has applied for a licence and has not paid or tendered the fee which is, in the opinion of the Commissioner, payable under s. 10(1) for the licence, the Commissioner may make an assessment of the amount which in his opinion should be paid for the issue of the licence and that person shall be liable to pay that amount less any amount previously paid: s. 10(7).

The reference to the expression "the relevant period" in s. 10(1)(d) as it applies in respect of a retail tobacconist's licence of the duration specified in s. 9(1) is a reference to the corresponding period in the month two months preceding the month for which the licence is sought: s. 2(6A)(a). The reference to the expression in s. 10(1)(c) as it applies in respect of a retail tobacconist's licence revocable at will under s. 9(2) is a reference to the year ending on 30 September preceding the calendar year in which the licence, if granted, will be in force: s. 2(6A)(b).

The liability of a retailer tobacconist to pay by way of licence fee an amount calculated ad valorem on the tobacco sold in the relevant period does not attach if the tobacco was purchased in Victoria from the holder of a wholesale licence but does attach if the tobacco was not purchased from such a supplier. As a Victorian wholesaler cannot lawfully sell to a retailer in Victoria unless the wholesaler holds a licence (s. 8(1)), the liability to pay an ad valorem fee attaches to a retailer if he buys from an out of State wholesaler but not if he buys from an in State wholesaler.

As counsel for Alston conceded in his argument, the economic reason for the presence of the words in brackets in s. 10(1)(c) and (d) is disclosed by the nature of the taxing regime established by the Act and, in particular, by the provisions of s. 10(1)(a) and (b). That regime involves, in addition to the compulsory licensing of retailers, the compulsory licensing of wholesalers. There are two kinds of wholesale licence: an ordinary wholesale licence and a group wholesale licence. The provisions of s. 10(1)(a) and (b) impose a licence fee on each category of wholesale licensee based on the actual or imputed sales of tobacco products (other than sales to other holders of a wholesale licence) in Victoria during the relevant preceding period. Because those sales are taken into account in the assessment of tax at the wholesale level, the products are excluded from the products whose sales are taken into account in the assessment of tax at the retail level.

It seems that the only circumstance in which past sales of tobacco purchased in Victoria would be taken into account in the assessment of a retail tobacconist's licence fee would be the purchase of tobacco from another retail tobacconist who sold otherwise than for the purpose of resale. But that is by the way. It does not affect the thrust of Alston's case that the retail licensee who buys his tobacco products from a wholesaler in another State pays a higher licence fee than he would pay if he bought the same products from a wholesaler in Victoria. Stated in summary terms, Alston's argument is that the Act discriminates against interstate trade in tobacco products and against interstate wholesalers by effectively selecting as the basis of calculation of the ad valorem content of the retailer's licence fee the value of the actual or imputed sales of interstate products during the relevant earlier period. Reliance is placed upon Fox v. Robbins [2] .

The starting point of a consideration of Alston's argument is the plain fact that what is involved is the imposition of a tax. There is no question of mere regulation of the activities of sellers of tobacco products. Indeed, the Commissioner did not contend to the contrary. If the tax had been imposed directly on all retail sales of tobacco products in Victoria, it would not have infringed the injunction of s. 92 of the Constitution. It would have been a tax which applied without differentiation or discrimination to interstate and intrastate products and transactions. Such a tax would, however, have been invalid in that it would have been an excise duty which it was beyond the constitutional competence of the Victorian Parliament to impose: Constitution, s. 90. The tax imposed by the Act escapes invalidity as an excise duty only by reason of its character as a fee for a licence or franchise to carry on a business of selling tobacco products during a future period, calculated by reference to past actual or imputed sales: see Dennis Hotels Pty. Ltd. v. Victoria [3] ; Dickenson's Arcade Pty. Ltd. v. Tasmania [4] ; Evda Nominees Pty. Ltd. v. Victoria [5] . Not surprisingly, the Commissioner does not seek to argue that the tax should be seen otherwise than as what it purports to be, namely, not a tax upon goods but a fee exacted from retailers of tobacco products for a licence essential for the lawful carrying on of their respective businesses. That being so, the essential question is whether the statutory imposition upon a retailer of the obligation to pay a licence fee calculated in the manner provided by the Act is, in the circumstances, properly to be characterized as discriminatory against interstate trade and commerce in a protectionist sense: see Cole v. Whitfield [6] .

1. (1960) 104 C.L.R. 529. 2. (1974) 130 C.L.R. 177. 3. (1984) 154 C.L.R. 311. 4. Ante, p. 360.

The requirement of the Act that a Victorian retailer of tobacco products be licensed applies indifferently to retailers of both local and interstate products. Of itself, the requirement does not contravene s. 92 of the Constitution. If the Act imposed the ad valorem licence fee by reference to the value of all tobacco products sold by a retailer in the relevant period, the imposition of the fee would not contravene s. 92 since it would not differentiate between tobacco purchased in Victoria and tobacco purchased outside Victoria; a fortiori it would not discriminate in a protectionist sense against the purchase of tobacco outside Victoria. The exclusion of tobacco purchased in Victoria from a licensed wholesaler from the total sale value of tobacco used as the basis of the calculation of the ad valorem licence fee does, however, involve an element of differentiation and at least prima facie discrimination. Since the effect of the Act is to require all Victorian wholesalers selling tobacco products in Victoria to be licensed, the tobacco products purchased by the ordinary Victorian retailer from a local wholesaler will, for practical purposes, be all purchased from the holder of a wholesaler's licence under the Act. That being so, the exclusion of tobacco purchased in Victoria from the holder of a wholesaler's licence from the value of tobacco sold in the relevant preceding period has the effect that, for practical purposes, the licence fee paid by a Victorian retailer will ordinarily consist of the flat fee of $50 (for an indefinite licence: s. 10(1)(c)) or $10 (for a monthly licence: s. 10(1)(d)) together with an amount equal to 25 per cent of the value of any tobacco purchased from an interstate wholesaler. In other words, the retailer who sells only tobacco products purchased by him from a Victorian wholesaler will pay the appropriate flat fee for his licence, while a retailer who sells only tobacco products purchased from an interstate wholesaler will pay that flat fee plus 25 per cent of the value of tobacco sold in the preceding relevant period. It follows that, if they be viewed in isolation, the provisions of the Act imposing the obligation to pay a retail tobacconist's licence fee of $50 or $10 plus an amount calculated by reference to the value of tobacco sold which has not been purchased in Victoria from a licensed wholesaler, discriminate against interstate purchases of tobacco in favour of purchases in Victoria. If it be viewed in isolation, that discrimination is undeniably protectionist both in form and substance. In form, the provisions of s. 10(1)(c) and (d) select the fact that tobacco was "purchased in Victoria" from a licensed wholesaler as the qualifying condition for exemption from inclusion in the products by reference to which liability to ad valorem tax is calculated. In substance, those provisions protect local wholesalers and the tobacco products they sell from the competition of an out of State wholesaler whose products might be cheaper in some other Australian market place for a variety of possible reasons, e.g., that the laws of the State in which he carries on his business as a wholesaler either do not require that he hold a licence at all or exact a licence fee comparatively lower than the fee exacted from a Victorian wholesaler.

Even when the provisions of the Act imposing the liability to pay the retail tobacconist's licence fee are read in the context of the Act as a whole, they retain their discriminatory and protectionist character. Such a reading reveals the explanation for the exclusion from the basis of calculation of the retailer's licence fee of tobacco products purchased within Victoria from a licensed wholesaler. That explanation is that the licence fee which the Act requires Victorian wholesalers to pay to the Victorian Government will not have been paid to the Victorian Government by an out of State wholesaler who does not carry on business in Victoria and therefore does not require a licence in that State. The explanation tends, however, to underline, rather than remove, the protectionist character of the discrimination at the retail level effected by the provisions imposing the tax. If wholesalers of tobacco products in another State already pay taxes and bear other costs which are reflected in wholesale prices equal to or higher than those charged by Victorian wholesalers, the practical effects of the discrimination involved in the calculation of the retailer's licence fee would be likely to be that the out of State wholesalers would be excluded from selling into Victoria and that the products which they would otherwise sell in interstate trade would be effectively excluded from the Victorian market. On the other hand, if out of State wholesalers pay less taxes and other costs than their Victorian counterparts, and in particular if they pay no (or a lower) wholesale licence fee, the effect of the discriminatory tax upon retailers will be to protect the Victorian wholesalers and the Victorian products from the competition of the wholesalers operating in the State with the lower cost structure. Either way, the operation and effect of the provisions of the Act imposing the retail tobacconist's licence fee are discriminatory against interstate trade in a protectionist sense. For practical purposes, their operation is to impose on Victorian retailers who, during the relevant earlier period, purchased tobacco products both locally and in the markets of another State, an obligation to pay to Victorian consolidated revenue an ad valorem tax calculated by reference to the sale value of so much of those products as came from interstate. Ignoring the flat fee of $50 or $10, the effect of s. 10(1)(c) and (d) is to discriminate against tobacco products sold by wholesalers in the markets of another State and to protect both Victorian wholesalers and the products which they sell from the competition of out of State wholesalers and their products. The wholesaler's licence fee, imposed on local wholesalers by reference to all their local sales, does not infringe s. 92 in that it does not discriminate against goods coming from another State. The ad valorem content of the retailer's licence fee does infringe s. 92 in that it discriminates against interstate trade and commerce in a protectionist sense by taxing a retailer only because of, and by reference to the value of, his actual or imputed purchases of products in any State other than Victoria.

It may be suggested that the effect of our conclusion that the method of calculation of the retailer's licence fee infringes s. 92 of the Constitution is to divert s. 92 from its intended function as a guarantee of the freedom of interstate trade and commerce from the barriers and burdens of protectionist laws and to permit the section to emerge again as a cause of senseless business or administrative artificiality and inefficiency and as a source of preference of interstate trade and commerce. Such a suggestion would be ill-founded. The out of State wholesaler is liable to taxes imposed by the State in which he carried on business in the same way as the Victorian wholesaler is subject to the taxes imposed by Victoria. The taxes imposed by the Act escape invalidity as excise duties only by reason of acceptance of their character as a licence fee as distinct from a tax on goods. Seen as a licence fee, the taxes imposed upon wholesalers are part of the costs of a Victorian wholesaler in carrying on his business. He will enjoy a competitive advantage or disadvantage in relation to an out of State wholesaler according to the comparative level of taxes and other costs which he must bear in carrying on his business. The fact that taxes paid by a wholesaler in one State are higher than the taxes paid by a wholesaler in a second State may provide an inducement for the first State to protect local goods and local wholesalers by the imposition of an "equalizing" tax upon its retailers in respect of their purchases of products from that other State. The most that such notions of economic equalization can do, however, is to provide some local justification for the imposition of a protectionist tax in respect of interstate goods at the later retail stage of distribution. They do not alter the character of the tax as such or remove it from the ambit of s. 92. Indeed, to hold that a law which protects local goods by imposing a discriminatory tax on interstate goods at the retail level is consistent with s. 92 because the law equalizes in favour of the local goods an advantage which the interstate goods enjoy in their State of origin in the course of manufacture or distribution would be to disregard the critical constitutional purpose which the section is designed to serve.

Nor is the protectionist character of the ad valorem tax on retailers calculated by reference to their interstate purchases removed by treating it as "equivalent" to the ad valorem tax imposed upon wholesalers in respect of their sales of local goods or by saying that both taxes are properly to be seen as being, "in substance", taxes on goods. The term "tax on goods" is a generic one which is used to describe a wide variety of different taxes imposed on a person by reference to some activity or relationship involving "goods". The term is used metaphorically. A tax cannot literally be imposed on goods: persons not goods pay taxes. A common characteristic of a tax on goods is that it is likely to be regarded as a cost of some step in the manufacture, production or distribution of goods with the result that it is absorbed in their subsequent price. Excise duties, such as a manufacturing impost or a sales tax, and import or border duties are the obvious examples of such a tax. As a descriptive term, the phrase "tax on goods" may be helpful to explain, in the context of notions of economic equivalence, the local reasons for the imposition of a protectionist tax such as an ad valorem border duty or a discriminatory ad valorem tax on the retail sale of imported goods. Thus, a possible local rationalisation of the imposition of particular intercolonial ad valorem border duties in pre-federation days might have been that the particular duties did no more than place intercolonial goods on an equivalent footing, in so far as local taxes were concerned, with local goods by subjecting the intercolonial goods to a border impost equal to some other tax on goods to which local goods of that kind were subjected at an earlier stage of manufacture, production or distribution than that at which the intercolonial goods first entered the local chain of distribution. Such an explanation or attempted justification would not, however, have deprived a border duty of its protectionist character. To the contrary, it would have emphasized the fact that such a duty was protectionist by explaining the rationale of the protection. Plainly enough, in the application of s. 92, the description "tax on goods" can be a cause of obscurity rather than of clarification if it covers a failure to identify the precise character of the impugned tax.

Thus, it provides no answer to the question whether, for the purposes of s. 92, a particular tax is properly to be characterized as discriminatory in a protectionist sense to say that it is but one method of collecting a "tax on goods" which is imposed in an equal amount in respect of all local and imported goods of that kind. If a tax is challenged on the ground that it offends s. 92, it is necessary first to identify what is the transaction or thing which attracts liability. If the tax is imposed, whether directly or indirectly, on a transaction in the chain of distribution of goods, the relevant inquiry is whether the tax is imposed only on transactions where the goods involved have come from or are going to another State or whether the tax is imposed on all transactions of the relevant kind without differentiation based on the source or destination of the goods involved. If the tax is imposed on transactions in a particular market - in this case, the Victorian retail tobacco market - it is the effect of the tax on transactions in that market which is material. In this case, the effect is on the supply of goods to that market. The effect of an equivalent tax on transactions at another stage in the chain of distribution of the same goods or goods of the same kind is immaterial. That must be so unless s. 92 permits the protection of an entire chain of distribution of goods within a State against competition from goods which might otherwise enter the chain from interstate. That proposition has only to be stated to be rejected. If that proposition were accepted, s. 92 would present no impediment to the imposition of border duties - at all events if they did not exceed the amount necessary to place on interstate goods a tax burden equivalent to the tax burden earlier placed on similar goods already in the local chain of distribution. As Barton J. commented in Fox v. Robbins [7] :

By burdens of this kind and that, whether under the name of licence fees or under any other name, the operation of interstate free trade could be so hampered and restricted as to reduce the Constitution in that regard to mere futility There is no difference in substance or effect in its bearing on interstate commerce between a burden such as this and a duty collected at the borders or the ports of one State on the products of another. In either case that commerce is restricted which the Constitution says shall be free; and in either case the disability may be made so great as to render the product unsaleable, and therefore virtually to prohibit its introduction. 1. (1909) 8 C.L.R., at p. 123.

A tax upon retailers in respect of their trading in goods may burden their trade in interstate goods consistently with the guarantee of s. 92 only if it applies equally to the interstate and local goods which the retailers sell; it cannot lawfully discriminate between them so as to protect the local goods. Again to quote the words of Barton J. in Fox v. Robbins [8] :

When the interstate transit is over and they have become part of the mass of property within the State, any goods may be taxed, no matter whence they have come. But they must be taxed alike with all other such goods in the State. The tax must be general, and laid equally on all goods of the kind to be taxed, whether their State of origin be the taxing State or another. It would have provided no answer in Fox v. Robbins to have demonstrated that the price of local wine to the retailer reflected an equal or higher burden of some local tax which had been imposed on local manufacturers or wholesalers at an earlier time. Similarly, the fact that the price of local tobacco products to the retailers will reflect the burden of the licence fee imposed upon local wholesalers provides no answer to the attack upon the discriminatory ad valorem tax imposed upon retailers by reference to interstate purchases in the present case. Nor does the fact that s. 92 invalidates the ad valorem content of the retailer's licence fee mean that the section has re-emerged as a source of preference for interstate trade and commerce over local trade and commerce. The source of any such preference, if it exists, lies in the fact that the imposition of the wholesaler's licence fee has placed local goods at a competitive disadvantage vis-à-vis goods which have passed through the wholesale stage of distribution in some other State. 1. (1909) 8 C.L.R., at p. 124.

There remains for consideration the question of the extent to which the provisions of the Act are invalidated by reason of the contravention of s. 92 involved in the designated method of calculating the ad valorem component of the retail tobacconist's licence fee. The conclusion which we have reached, in the light of s. 6(1) of the Interpretation of Legislation Act 1984 Vict, is that the invalidating effect of the contravention of s. 92 is confined to the imposition of the ad valorem content of the retail tobacconist's licence fee. In other words, the contravention of s. 92 involved in the designated method of calculating the ad valorem content of the fee does not, in the context of s. 6(1), extend to invalidate either the provisions of the Act requiring that a retail tobacconist hold a licence or the taxing provisions of the Act to the extent that they impose a liability to pay a flat retail tobacconist's licence fee of $50 or $10.

In the result, the Commissioner was in error in withholding the grant of monthly licences on the ground that Alston had not tendered more than the flat fee of $10. It suffices for the purposes of the present proceedings that the questions reserved be answered as follows:

1. Section 10(1)(c) is invalid to the extent to which it provides: together with an amount equal to 25 per centum of the value of tobacco sold by the applicant in the course of tobacco retailing in the relevant period (other than tobacco purchased in Victoria from the holder of a wholesale tobacco merchant's licence or a group wholesale tobacco merchant's licence). Section 10(1)(d) is invalid to the extent to which it provides: together with an amount of 25 per centum of the value of tobacco sold by the applicant in the course of tobacco retailing in the relevant period (other than tobacco purchased in Victoria from the holder of a wholesale tobacco merchant's licence or a group wholesale tobacco merchant's licence).

The Business Franchise (Tobacco) Act 1974 Vict ("the Act") requires all persons carrying on the business of selling tobacco in Victoria, whether by wholesale or retail, to be licensed. There is provision for two categories of licence: a wholesale tobacco merchant's licence and a retail tobacconist's licence. Fees are imposed for the issue of these licences. Apart from a relatively small flat amount, the fee in each case is 25 per cent of the value of the tobacco sold by the applicant for a licence during a period which has passed, the length of which varies according to the period during which the licence will be in force. In the calculation of this ad valorem component of a retail tobacconist's licence fee, tobacco purchased in Victoria from the holder of a wholesale tobacco merchant's licence is excluded. The fee for a wholesale tobacco merchant's licence also contains an ad valorem component for tobacco sold other than to a licensed wholesaler. The value of any tobacco sold for delivery and consumption outside the State is disregarded in determining either fee. The scheme of the legislation is that trade in tobacco is taxed in Victoria at the wholesale level but if it is not possible to impose the tax at that level, it is imposed at the retail level. The level at which the tax is imposed will be a matter of indifference to the ultimate consumer because by the time it reaches him the tax will have entered into the price of the product to the extent that market forces allow it to be passed on.

The defendant is a retail tobacconist who, having imported tobacco from Queensland and having sold it in Victoria without a licence, resists an injunction at the suit of the Commissioner for Business Franchises to restrain him from continuing to sell without a licence. He resists the injunction upon the basis that the operative provisions of the Act offend s. 92 of the Constitution and are invalid. The defendant argued that the requirement that he hold a licence under the Act in order to sell tobacco brought in from outside the State necessarily burdens interstate trade in a manner prohibited by s. 92. In the light of Cole v. Whitfield [9] , the submission in that form cannot succeed. But the argument remains that the manner in which licence fees are calculated and imposed under the Act discriminates against interstate trade in tobacco by protecting Victorian trade in that product.

That argument has a superficial plausibility in that tobacco purchased from another State is purchased from a person who is not the holder of a wholesale licence under the Act and the purchaser in Victoria, when he sells that tobacco, is therefore subject to the ad valorem component of the fee in relation to it. But to put the matter thus is to present an incomplete picture of the practical operation of the Act and, as was observed in Cole v. Whitfield, it is the practical operation of the legislation which will largely determine whether there is discrimination upon protectionist grounds. What the argument put in that way leaves out of account is the fact that an interstate wholesaler is not subject to any franchise fee under the legislation and is able to sell tobacco to the Victorian retailer at a price which will reflect the absence of this expense. This advantage which the interstate wholesaler has is, however, balanced by the fact that the Victorian retailer who imports the tobacco will bear a fee calculated by reference to its value when it is sold in Victoria and this fee will be reflected in the price of the product to the ultimate consumer. The legislation does not seek to operate to the advantage or disadvantage of the retailer according to whether he obtains his tobacco within or outside the State.

It is obvious that the reason why the legislation imposes the fee at the wholesale level where it is possible to do so is because there is only a small number of wholesalers but many retailers and it is easier for that reason to collect the tax from the former rather than from the latter. But that does not suggest protectionism. The plain fact of the matter is that the object of the legislation is not to favour Victorian trade at the expense of interstate trade in the product. All trade in tobacco in Victoria is subjected to the expense of the franchise fee at one point or another and the economic effect of the tax is the same, whether the tobacco is acquired by the retailer from within or outside the State.

No doubt the form of the tax imposed by the Act was dictated by the need to avoid the imposition of an excise duty. Excise duties are denied to the States by s. 90 of the Constitution. It is clear enough that in devising the franchise fee in question in this case the draftsmen placed reliance upon the decisions of this Court in Dennis Hotels Pty. Ltd. v. Victoria [10] and Dickenson's Arcade Pty. Ltd. v. Tasmania [11] . The distinctions drawn in those cases between a franchise fee and an excise duty may be a matter of debate (see Gosford Meats Pty. Ltd. v. New South Wales [12] ), but it is not a debate which has any relevance in the context of s. 92. The difficulties in relation to s. 90 arise from the duty cast upon this Court by the Constitution of defining the meaning of a concept - a duty of excise - which "has never possessed, whether in popular, political or economic usage, any certain connotation and has never received any exact application": Matthews v. Chicory Marketing Board (Vict.) [13] , per Dixon J. Similar difficulties do not occur with s. 92, which requires a consideration of consequences rather than concepts. The consequences which are relevant are economic consequences for it is largely the ultimate economic effect which will determine whether or not legislation has been enacted in pursuit of a protectionist object. But here, where the impost applies to all trade in tobacco in Victoria, interstate and intrastate alike, there is no basis upon which to discern any element of protectionism. It is not to be found in the alternative methods of collecting the tax which produce the same ultimate effect in economic terms.

1. (1960) 104 C.L.R. 529. 2. (1974) 130 C.L.R. 177. 3. (1985) 155 C.L.R. 368. 4. (1938) 60 C.L.R. 263, at p. 293.

This case may be contrasted with Fox v. Robbins [14] . In that case Western Australian legislation authorized the imposition of a fee for a licence to sell wine produced from fruit grown in Western Australia lower than that imposed for a licence to sell wine produced from fruit grown elsewhere in Australia. The fee prescribed for the former kind of licence was two pounds and the fee prescribed for the latter kind of licence was fifty pounds. There was thus a clear disability imposed upon the sale of the product of other States and it was of a protectionist character. The conclusion was inevitable that the legislation offended s. 92. Had the imposition been the same irrespective of where the fruit was grown there would have been no distinction between that case and the present case, save that in that case there was only one point of collection of the tax whereas in the present case there are alternative points of collection. It is plain that if the imposition had been the same, the disability which the Court found to have been imposed upon the sale of the product of other States would not have existed. Indeed Griffith C.J. and Higgins J. were prepared to read down the discriminatory provisions in that case so that they would operate in this way. Thus Fox v. Robbins is a clear case of protectionism and the judgments in that case must be read in that light.

If the argument were to be accepted that the manner in which licence fees are calculated and imposed under the Act discriminates against interstate trade in a protectionist manner, two alternatives would exist to cure the defect. On the one hand the legislation might be amended to exclude the value of tobacco purchased in the course of interstate trade from the calculation of the ad valorem component of the retail tobacconist's licence fee. This would, however, result in a preference being given to interstate trade and s. 92 can scarcely be read as requiring such a result. On the other hand, the collection of the fee could be restricted to the retail level and be calculated upon the value of all sales of tobacco. The practical result produced by the second alternative is no different in economic terms from that produced by the Act in its present form, save that the tax would be a great deal more difficult to collect. Consideration of these alternatives serves to demonstrate the danger of restricted analysis in any attempt to ascertain whether the legislation gives rise to discrimination of a protectionist kind.

Our conclusion, therefore, is that the agreed or established facts fail to demonstrate that the Act is protectionist in character. It is wholly valid and each of the questions reserved should be answered in the negative.