Collector of Customs (NSW) v Southern Shipping Co Ltd

But is s. 60 a law imposing taxation? It certainly imposes a liability to pay an amount estimated to be equal to the amount of some particular excise duty. Sub-section (2) of s. 60 says it is to be a debt due to the Commonwealth and may be sued for and recovered in a court of competent jurisdiction by proceedings in the name of the Collector. Sub-section (4), however, says that the section does not affect the liability of a person arising "under or by virtue of any other provision of this Act or of a security given under the Act". Probably this does not mean that when a payment has been made under s. 60 to the Collector by a person held responsible under that provision for failing to keep the goods safely or to account for them, excise may be recovered from somebody else. All it does is to make the liability under s. 60 collateral and not substitutional for the liability which may have been incurred under other provisions. But on a complete view of s. 60 it seems rather to be a provision for the protection of the revenue, not a primary imposition of taxation. The distinction between a sum of money which can be made recoverable as protection to the revenue and the actual imposition of tax may appear a fine one, but as Moore v. The Commonwealth [1] shows, it is a critical one for the purpose of s. 55 although probably not for any other purpose. Under s. 51 (ii.) of the Constitution the power with respect to taxation extends to enable legislation to be passed for the protection of the revenue that arises from the tax imposed. It is immaterial whether this act is ascribed to s. 51 (xxxix.) or, as is perhaps preferable, is regarded as necessarily involved in the subject matter of the power itself. It must be remembered that the conditions prescribed by s. 60 (1) involved factors which go to safekeeping and to possession, custody and control, and perhaps the movement of the goods from the manufacturer. It is not based on primary notions of liability to tax. It is a secondary liability and is based on the hypothesis that the tax is escaped. It is indeed an ancillary measure and not itself a tax.

It follows that the questions in the case stated should be answered: I (a), (b) and (c) Yes. I (d) unnecessary to answer. II Yes. III No.

This case, which is stated under s. 18 of the Judiciary Act 1903-1959 Cth, consists of facts found upon the trial of an action based upon s. 60 of the Excise Act 1902-1952. The action arose out of the theft from a store on a wharf at Sydney of a substantial part of a consignment of tobacco which had been delivered to the defendant for shipment to Hobart. The whole consignment consisted of excisable goods which had not been entered for home consumption. The goods were subject to the control of the Customs and were in transit in the course of "removal to an approved place" in accordance with s. 58 of the Excise Act. The occupier of the wharf and the store was the Maritime Services Board. The consignment was deposited with the approval of Customs in the store pending shipment. In accordance with Customs' procedure the key of the store was kept in the Department's office on the wharf but it was accessible to the defendant if there was any occasion to open the store. The store was broken into and part of the consignment stolen at night and the thieves have not been detected nor the goods traced. The Collector sued the defendant on the basis that it was liable under both pars. (a) and (b) of s. 60 (1) to indemnify the Collector in respect of the stolen goods. The defendant has contended by way of defence that because Customs had control of the key of the store, the Customs not the defendant was in possession of the consignment and the defendant was therefore not answerable for its loss. The defendant also sets up that it was a reasonable precaution to take for the safety of the goods pending shipment to put them in the store and it therefore did not fail to keep them safely within the meaning of par. (a): and that as regards par. (b) it gave an unimpeachable explanation of the reason of the disappearance of the goods by reporting their theft which the Collector ought in law to accept. Further the defendant says that s. 60 is not a good exercise of the legislative power of the Federal Parliament.

In the case of The King v. Lyon [1] O'Connor J. made some observations which are as applicable to excise as to customs: "The whole policy of the Customs Act, as indicated by a number of sections, is that, from the time of importation until the time of paying duty, the customs shall not lose control of the articles imported. That is indicated directly in s. 30, which provides that imported goods shall be subject to the control of the customs from the time of importation until delivery for home consumption or exportation. The object of that provision, if it were necessary to give any reasons for its enactment, is obvious; if once goods go into home consumption, that is, into circulation, it becomes almost impossible to trace them. The only security the customs authorities could have in such a case for the payment of duty would be in most cases the personal security of the importer. Therefore it is, if the Act is to be effective, that all through the dealings with the goods, from the time they are first imported until duty is paid, they must be kept under customs control" [1] . This statement is, mutatis mutandis, applicable to the Excise Act. The object of s. 60 is to effectuate the policy in relation to excise explained by O'Connor J.

1. (1906) 3 C.L.R. 770. 2. (1906) 3 C.L.R., at p. 784.

It is first necessary to consider the defendant's point that because the key of the store was kept in the Customs office, they, not the defendant, had possession of the goods when the thieves broke in and stole them. This point is not supportable in law. It is stated in Williams on Personal Property 16th ed. (1906) p. 68 "Unless the intention were that, from the moment of handing over the key, the goods should remain under the exclusive control of the person receiving the key, possession of the goods would not appear to be effectively delivered". See also Wrightson v. McArthur [2] ; Goodeve on Personal Property 9th ed. (1949) p. 42. It is not possible to infer that there was any transfer of the goods from the defendant to Customs. The control of the key which Customs assumed was merely an incident of Customs control existing in the case of excisable goods not entered for home consumption.

It follows that the defendant was not divested of responsibility imposed by par. (a) or (b) of s. 60. The issues which therefore arise are whether the care which the defendant exercised by putting the goods in the store and locking it was sufficient to discharge its responsibility under par. (a) and whether its report - the reliability of which is not doubted - about the theft of the goods was sufficient under par. (b). The task of keeping goods safely cannot be said to have been fulfilled if the goods are stolen even though reasonable precautions were taken. Under par. (a) the person concerned is not liable unless he "fails". The plaintiff contends that that word means "does not" and imposes absolute liability. "Fails" is a word with various meanings. I think that in s. 60 its appropriate meaning is that the person concerned is to be liable if he comes short of keeping the goods safely, that is preserving them from loss or damage. The word "fails" in my opinion is not strong enough to impose upon the person concerned so onerous a duty as that of avoiding the unavoidable. The plaintiff's contention would mean that it does. Lex non cogit ad impossibilia. Paragraph (a) should be read subject only to that presumption. The facts here do not show that the goods were lost because of any event which in my view of the construction of par. (a) takes the defendant outside the operation of the words. Paragraph (b) is expressed to be alternate to par. (a). It is sufficient for the plaintiff's purposes here if his case under par. (a) is made out. I think it is.

Paragraph (b) is in my view a drag-net provision. It exposes every person who has or has been entrusted with the possession, custody or control of excisable goods which are subject to Customs' control to the liability of being requested by the Collector to account for them to his satisfaction. The accounting may be done by producing the goods or, if they are missing, by giving an explanation which is satisfactory to the Collector. He has a discretion, which he is bound to exercise reasonably, to reject what is done or stated by way of accounting for the goods. In my opinion it was reasonable for the Collector to reject the defendant's account of what happened to the goods because the reason for their disappearance from Customs' control, namely breaking entering and stealing, justified the Collector in considering that the defendant failed to keep the goods safely. The defendant was in default under par. (a) and that was sufficient to make it liable. Paragraph (b) was not, I think, intended to provide a person who contravenes par. (a) with the opportunity of explaining away his default thereunder.

As regards the question whether s. 60 is constitutional; in my opinion the nature of this section is that it imposes duties on custodians of excisable goods, subject to Customs' control, which are ancillary to and by way of security for the due payment of excise. The provision is machinery for the collection of tax imposed by the Excise Tariff, in this case, the Act of 1921-1956. In this view the section is within the legislative power to make laws with respect to "Taxation" (sub-ss. (ii.) and (xxxix.) of s. 51 and s. 90 of the Constitution) and it is not struck by s. 55.

For these reasons I would answer the questions as follows: I (a), (b) and (c), Yes; I (d) Yes, in this case, having regard to the defendant's breach of par. (a) of s. 60; II. Yes; and III. No. I would determine the action by ordering that judgment be entered for the plaintiff for the amount claimed, namely £2,274 9s. 2d. with costs, including the costs of this case stated.

On the facts appearing in the stated case it seems to me plain that the answer to each of the questions 1 (a), (b) and (c) and II should be Yes, whatever the word "safely" may mean in s. 60 of the Excise Act 1901-1952 Cth. It is unnecessary to answer question 1 (d).

As to question III, I am of opinion that s. 60 is a law with respect to taxation and as such is within power, but that it is not a law imposing taxation and consequently is not within the application of either part of s. 55 of the Constitution. It imposes upon a person a liability to make to the Commonwealth a payment in the nature of compensation for a loss of excise duty, the person being made liable because he has committed one or the other of two defaults which the Parliament has considered sufficient to affect him with responsibility for the loss. I would therefore answer question III, No.

As appears from the case stated the plaintiff claims from the defendant, pursuant to s. 60 (1) of the Excise Act 1901-1952, the sum of £2,274 9s. 2d., that being the amount equal to the amount of the excise duty which would have been payable in respect of forty cartons of manufactured tobacco which had been delivered to the defendant if they had been entered for home consumption on the day on which the plaintiff's demand for that sum was made. In fact, the goods in question were not in the possession or custody or under the control of the defendant when the demand was made. They had been stolen some little time previously from the "dead-house" on the wharf where they were stored whilst awaiting shipment to the manufacturer's bond store in Hobart. There is no question that the goods were excisable goods and that, at the time of the theft, they were, within the meaning of s. 61 of the Act, subject to the control of the Customs. Further it is common ground that the validity of the plaintiff's claim depends upon whether at that time the defendant had, or had been, "entrusted with the possession, custody or control" of the goods and, thereupon, whether, within the meaning of s. 60 (1), the defendant failed to keep the goods safely, or, whether, upon being requested by the plaintiff so to do, it did not account for them to the satisfaction of the Collector.

The goods were part of a consignment which had been removed from the Sydney factory of the manufacturer, pursuant to s. 56, and delivered by the latter to the defendant for carriage by its vessel to Hobart. They were so delivered and accepted by the defendant on 18th April 1957 and were placed by the defendant's servants or agents in what is called the "dead-house" on No. 4 wharf at West Circular Quay. The defendant's vessel, s.s. "Karuah", is said to have been allotted to this berth by the Maritime Services Board and the keys to the gate of the wharf and the key to the "dead-house" were handed to the defendant in order that it might avail itself of the use of the wharf facilities. In fact, the s.s. "Karuah" occupied the berth from 17th April 1957 to 23rd April 1957. Whether loading or unloading operations were proceeding when the goods in question were brought to the wharf and placed in the "dead-house" does not appear but it is clear that the defendant took delivery of the goods and placed them in the store which the Maritime Services Board had made available for its use and which, in fact, it used not only for the storage of goods subject to the control of the Customs but also for the safe-keeping of other goods which were thought to be particularly valuable or particularly susceptible to pillage.

Upon these facts there can be no question that the goods came into the possession of the defendant. But the key of the "dead-house" did not at all times remain in its possession. In accordance, it is said, "with the usual practice" this key was left in the Customs office on the wharf during meal breaks and from the cessation of work at the end of each working day until the commencement of work on the next working day. Nevertheless, a duplicate key of the Customs office was left on the wharf under the seal of the Customs in order that it might be available for use in case of emergency during the absence from the wharf of the Customs staff. The theft of the goods took place at sometime between midnight on Saturday 20th April 1957 and 5 a.m. on Sunday 21st April 1957 and during the whole of this period the key of the "dead-house" was in the possession of the Customs. It is upon this circumstance that the defendant founded the contention that during this period the goods were not in its possession or custody or under its control. Each time the key of the "dead-house" was placed in the Customs office, it is contended, the possession, custody and control of the goods passed from the defendant to the plaintiff and, presumably, on each occasion when the key was taken from the Customs office possession, custody and control was re-assumed by the defendant. The additional point is made, that according to the provisions of the Act, the goods were at all times "subject to the control of the Customs" and it is asserted that delivery of the key to the Customs office operated to transfer actual possession, custody and control. To my mind the solution of this problem - if there be one - is a question of fact rather than of law. No doubt the delivery of the key of a room or a shed may constitute constructive delivery of the goods which it contains. But such a result depends upon the accompanying intention of the parties and there is nothing in the admitted facts to suggest that the key of the "dead-house" was placed in the Customs office with any such intention. It is, I think, impossible to spell out from the facts that the defendant intended to relinquish, or that the plaintiff intended to assume, possession of all the goods in the "dead-house", free or otherwise, on each occasion when the key was deposited in the Customs office. We are not told anything about the origin or purpose of the so-called "usual practice" but there is nothing to suggest that the lodging of the key in the Customs office represented anything more than an additional precaution to ensure the safe custody of excisable goods whilst in the ship-owner's possession and during periods when work was not being carried on and, perhaps, when its staff were absent from the vicinity of the wharf. That being so, I am of opinion that the first question ought to be answered by saying that upon the facts appearing in the case stated the goods in question were in the possession, custody and control of the defendant at the time when they were stolen.

The next question is whether upon the facts stated the defendant failed to keep the goods safely or, having been requested by the Collector so to do, did not account for them to his satisfaction. A good deal of the argument on this aspect of the case turned upon the expression in s. 60 (1) (b) - "does not account for those goods to the satisfaction of the Collector" - and it was contended that if the defendant satisfied the Collector that the goods had been stolen this constituted an accounting for the goods. This, it seems to me, is equivalent to saying that the defendant fulfilled his obligation to account for the goods if, in effect, he established that, without any default on his part, the goods had ceased to be in his possession. No doubt, if he showed that he had parted with them in a manner authorized by the Act, as for example, by delivering them to the manufacturer's bond store in Hobart, this would be an accounting. Such an explanation would trace the goods from his possession to that of the manufacturer in accordance with the provisions of the Act. But merely to establish that he had lost the goods by theft at the hands of some unknown person is not to account for the goods; it is, merely, to account, for their disappearance. If it were otherwise then it seems plain that a person who has been entrusted with the possession of excisable goods might account for them by a recital of facts which showed that he had, within the meaning of s. 60 (1) (a), failed to keep them safely. What this expression means in the context of this clause is of prime importance and the defendant was at pains to establish that the obligation to keep goods safely is not, as it was said, absolute; the expression, it was asserted, connotes a failure on the part of the custodian to observe some unspecified standard of care with respect to their safety. Unless some such standard was predicated there could not, it was said, be a "failure". But as Jordan C.J. said in Ingram v. Ingram [1] : "the meaning of the word "fail" depends upon the context in which it is found. In some contexts it may mean simply the omission to do the thing in question, irrespectively of any reason which may have existed for his not doing it: Miedbrodt v. Fitzsimons [2] ; R. v. Southwark Borough Council; Ex parte Southwark Borough Market Trustees [3] . In other cases it may mean an omission to do the thing by reason of some carelessness or delinquency on his part, but not omission caused by impossibility for which the person in question is not responsible: cf. Loates v. Maple [4] . In other cases, it may mean omission to do the thing, but so that omission caused by impossibility arising from some causes is included and from others is excluded" [5] . In the case of s. 60 (1), however, the obvious purpose and object of the provision makes it clear that the defendant's argument must be rejected. The provision is not designed to inflict a penalty upon a bailee for some breach of duty imposed by the bailment; it is a provision which is designed to ensure that the excise revenue shall not suffer if excisable goods, by some irregular means, find their way into home consumption. So much is clear from the provisions of the Act itself. Section 60 (1) is to be found in Pt VI of the Act and that part purports to relate to Payment of Duty, Removal of Excisable Goods from Factories, and Excise Control. By s. 54 the manufacturer of excisable goods, or, where the owner of excisable goods enters them for home consumption, the owner of the goods, is bound to pay the excise duty which is imposed by the Excise Tariff. The duty must be paid before an entry for home consumption is passed (s. 59) and no excisable goods may be removed from a factory without an entry made and passed authorizing their removal (s. 56). But they may be removed pursuant to an entry for exportation or for removal to an approved place. However a manufacturer may become liable to pay excise duty in respect of goods which have never been entered by him for home consumption. This liability may arise under s. 62 if it appears, on taking stock of excisable goods manufactured by a manufacturer, that duty has not been paid on the full quantity of excisable goods on which duty ought to have been paid. In such a case the manufacturer is bound to pay to the Collector "the amount of the deficiency unless such deficiency is accounted for to the satisfaction of the Collector". But if excisable goods are moved from a factory to an approved place, as these were, can it be said that the excise duty may be recovered from the manufacturer if, whilst in the lawful possession of some person, they are stolen? Proof of the removal with the authority of the Customs and of the necessary transfer of possession would I think account for the deficiency within the meaning of s. 62. The expression "unless such deficiency is accounted for to the satisfaction of the Collector" is not without its difficulties but the manufacturer would, at least, fulfil the requirements of the section if he showed that with the approval of the Customs, he had relinquished possession of excisable goods to a carrier for removal to an approved place. In these circumstances it is I think proper to conclude that the obligation placed upon the carrier by s. 60 (1) is at least analogous to that initially resting upon the manufacturer. That is to say, that whilst he is in possession of the goods it is his responsibility alone to ensure that the goods do not irregularly find their way into home consumption. It is in this sense that he is bound to keep the goods safely and to account for them. That being so he may escape liability if he is still in possession of the goods or if he can account for them by showing that they did not pass into home consumption from his hands. That he may do by showing that he has parted with possession of them in some authorized manner or, I should think, by showing that the goods whilst in his possession have been destroyed. The agreed facts clearly show a failure on the part of the defendant to keep the goods safely in this sense and, that being so, the only other question which remains for consideration is that which arises upon s. 55 of the Constitution.

1. (1938) 38 S.R. (N.S.W.) 406; 55 W.N. 163. 2. (1875) L.R. 6 P.C. 306, at pp. 315, 316. 3. (1921) 90 L.J.K.B. 359; 124 L.T. 623. 4. (1903) 88 L.T. 288 at p. 290. 5. (1938) 38 S.R. (N.S.W.), at p. 410; 55 W.N. 163.

The foundation of this argument is to be found in the words of s. 60 (1) which, in the circumstances specified by the sub-section, purport, in terms, to create an obligation to pay, not the excise duty, but "an amount equal to the amount of the excise duty ". This, it is said, is a new impost and not the duty imposed by the Excise Tariff and, that being so, the amending Act by which the sub-section was introduced - Act No. 55 of 1952 - offended against s. 55 of the Constitution. It would, of course, be of no avail to the defendant to show that this Act offended only against the first paragraph of s. 55 and, accordingly, it was sought to invoke the provisions of the second paragraph. The tax, it was said, was not a duty of excise and the Act dealt with more than one subject of taxation. Alternatively, it was contended that, if the tax was properly to be regarded as a duty of excise, the amending Act did not deal with duties of excise only. There are fallacies in this argument but it is unnecessary to explore them. Section 60 (1) is not, in my view, a law which imposes taxation and the initial step in the defendant's argument is, at the most, only superficially attractive. What the sub-section is designed to secure is the collection of the duty imposed by the Excise Tariff and in order to achieve this it was necessary, for the purposes of the sub-section and in the absence of an entry for home consumption, that some provision should be made for ascertaining the value of the goods as at some specified date. This the section does by providing that what shall be paid shall be "an amount equal to the amount of the Excise duty which, in the opinion of the Collector, would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand". Of course, the same result might have been achieved simply by requiring payment of the amount of excise duty which, in the opinion of the Collector, would have been payable if the goods had been entered for home consumption upon some specified day. But the difference in terminology is, in my view, of no constitutional significance and the provision, as it stands, is a provision dealing with the collection of the charge imposed by the Excise Tariff.

For these reasons questions (a), (b) and (c) in the case stated should be answered in the affirmative. It is, I think, unnecessary to answer question (d).

Case stated pursuant to s. 18 of the Judiciary Act 1903-1960. Before turning to the case which McTiernan J. stated upon the trial of this action wherein the plaintiff, as Collector of Customs for the State of New South Wales, on behalf of the Commonwealth of Australia seeks to recover the sum of £2,274 9s. 2d. pursuant to s. 60 of the Excise Act 1901-1952, it is desirable to say something of a general nature about the scheme of the Commonwealth Excise Act.

The main purpose of the Act is to ensure the payment of duty upon excisable goods as they go into home consumption and, to achieve this, excisable goods are subjected to Customs control from the point of manufacture until either they are delivered for home consumption or they are exported to parts beyond the seas (ss. 54-57 and 61). Excisable goods not exported go normally into home consumption, and before an entry for home consumption is passed to release the goods from Customs control, duty must be paid (s. 59). This is the principal way of collecting excise duties. Excisable goods, however, may disappear between manufacture and either exportation or entry for home consumption; accordingly, conformably with the main purpose of the Act, duty may, under special provisions to meet any such contingency, be exacted in any case where the Collector is not satisfied that the missing goods have not gone outside Customs control into home consumption. This is, as it seems to me, the general effect of ss. 60 and 62, but for the purpose of this case it is necessary to look more closely at s. 60.

This section took the place of s. 60 of the Excise Act 1901-1949 and reg. 188 which had been held invalid in Morton v. Union Steamship Co. of New Zealand Ltd. [1] . The earlier s. 60 was complementary to s. 58 (b) and (c) - which provided for entries authorizing the removal of goods to an approved place or for exportation - and required the manufacturer of the goods to give security before the passing of any such entry. Regulation 188 (1) was as follows: "Every person who has the control or custody of excisable goods, while such goods are in course of removal, or are in transit coastwise, or are in or at an approved place, or until delivery for home consumption or exportation to parts beyond the seas, shall be responsible for the safe keeping of such goods while they are in his control or custody, and shall account for such goods to the satisfaction of the Collector." Section 60 (1), as it now stands, is as follows: "Where a person who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the control of the Customs - (a) fails to keep those goods safely; or (b) when so requested by a Collector, does not account for those goods to the satisfaction of the Collector, that person shall, on demand in writing made by the Collector, pay to the Commonwealth an amount equal to the amount of the excise duty which, in the opinion of the Collector, would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand."

Comparing the existing provision with those which it replaced, it is to be observed that the former liability of the manufacturer to give particular security has disappeared and the obligation to pay to the Commonwealth falls in either of the cases mentioned upon the person who either has, or has been, entrusted with the possession, custody or control of the goods. In this setting it is hardly likely that the words "keep safely" refer to protecting the goods from damage or destruction or anything of that nature; for the safety with which the section is concerned is that the goods - subject as they are to the control of Customs - do not get out of Customs control into home consumption without the payment of duty; similarly, the account of the goods that is required is an account which shows an authorized relinquishment of possession, custody and control or, despite an unauthorized loss of possession, custody and control, that the goods have not got into home consumption without the payment of duty or that, notwithstanding the failure to keep the goods safely, Customs control over them is still effective. It follows that excisable goods which have been stolen from a local store cannot be said to have been "kept safely" and that it could not be a satisfactory account of the missing goods to say merely that they have been stolen, or even that they have been stolen notwithstanding that the person whose duty it was to keep them safely had taken reasonable care to protect them from theft. The words "fails to keep safely" do not require any fault on the part of the person concerned beyond proof that the goods have not been kept safely in the sense indicated. In many cases the failure to keep the goods safely will inevitably mean that no satisfactory account for them can be given but, notwithstanding this, I do not regard pars. (a) and (b) of s. 60 (1) as necessarily cumulative provisions. They are expressed as alternatives and goods which might in fact have been kept safely enough may nevertheless not be accounted for satisfactorily merely because the person with, or entrusted with, possession, custody or control simply refuses to account for them at all. Of course it hardly needs to be said that if the goods have not been kept safely but an account for them is given to the satisfaction of the Collector, that would end the matter, for in such a case there would not be any demand by the Collector.

Turning now to the case stated, it appears that possession, custody and control of 295 cartons of tobacco had been entrusted, by the manufacturer to the defendant by the delivery of the tobacco to it at No. 4 wharf, Circular Quay, Sydney, where the defendant's ship, s.s. "Karuah", was berthed, for shipment thereon to Wills Sales Bond, Hobart, in accordance with Customs authority which had been obtained. The defendant, with the approval of the Customs, stored the tobacco in what is called "the dead house" adjoining the wharf. When the defendant obtained the berth at No. 4 wharf from the Maritime Services Board of New South Wales, it received the gate keys and the key of the dead house, and it was the usual practice whenever work ceased for the key of the dead house to be deposited in the Customs office at Nos. 4 and5 wharves. On 18th April 1957 the key of the dead house was so deposited by the defendant's watchman and it was while that key was in the Customs office that thieves broke into the dead house and stole 40 cartons of tobacco which have not been recovered and upon which duty, had the tobacco been entered for home consumption, would have been £2,274 9s. 2d. that is, the amount the Collector claims from the defendant in the action.

These facts seem to me to establish that the possession, custody and control of the goods which were stolen had been entrusted to the defendant, and that possession, custody and control remained with the defendant up to the time of the theft, notwithstanding the deposit of the key of the dead house with the Customs. It seems that this latter conclusion is not necessary to establish the defendant's liability but, since the matter has been argued, I would say that I am not prepared to treat the deposit of the key as effecting a transfer of possession, custody or control of the tobacco from the defendant to the Customs. To do so would be quite unrealistic, especially as the defendant could always obtain for its use the key of the dead house by using a key of the Customs office which was available to it. There is nothing to show that the deposit of the key of the dead house, as often as it happened, was intended to affect the defendant's rights or obligations as the person to whom possession, custody and control of the goods had been entrusted; or that, there being Customs control of the goods wherever the key was, Customs while the key was deposited in the Customs office took over possession, custody and control of the goods in the sense in which those words are used in s. 60.

Accordingly, upon the construction of s. 60 (1) which I have adopted, the defendant both having, and having been entrusted with, the possession, custody and control of 295 cartons of tobacco, failed to keep safely, in the sense of s. 60 (1), 40 of those cartons and, when called upon by the Collector to account for them, did not do so in any manner that could be regarded as satisfactory. I consider, therefore, that upon the provisions of the Excise Act as they stand, questions I (a) (b) (c) and (d) and II should be answered affirmatively, but this does not conclude the matter for, after the case had been stated asking questions I and II, the defendant obtained an order adding a further question, III - "Whether the said s. 60 is invalid on the ground that it is beyond the powers of the Parliament of the Commonwealth and/or contrary to the provisions of s. 55 of the Commonwealth Constitution." It is to this question that I now turn. To consider the question it is necessary to go back to the Excise Act 1952, which brought s. 60 into the excise legislation. It comprises four sections: the last, with which we are particularly concerned, repeals ss. 59 and 60 of the Excise Act 1901-1949 and inserts the present ss. 59 and 60 in their stead. Section 1 merely deals with the title and citation of the Act and the Excise Act as amended; and s. 2 substitutes for earlier sections two machinery sections which deal with duties of excise but do not impose taxation. Section 3, which repeals s. 54 of the Excise Act 1901-1949 and inserts the present s. 54 in its stead, according to the accepted view, does not impose taxation. Section 54 is as follows: "The manufacturer of excisable goods, or, where the owner of excisable goods enters them for home consumption, the owner of the goods, shall pay to the Collector, in accordance with this Act, the excise duty on those goods." If, therefore, s. 60 imposes taxation but the other provisions brought into the Act by the Excise Act 1952 deal with something other than the imposition of taxation, the effect of the first provision in s. 55 of the Constitution - "Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect" - would render those other provisions of no effect but would leave s. 60 standing. At the other end of the scale, if s. 60 does not impose taxation, then s. 55 of the Constitution, which has no application except in relation to laws that impose taxation, cannot in any way affect the validity of the Excise Act 1952 or any part of it. The only intermediate position which I can see would be to treat s. 60 as imposing taxation (not duties of excise) and some of the other provisions in the Excise Act 1952 as dealing with the imposition of taxation (duties of excise) so that, notwithstanding the application of the first part of s. 55 to so much of the Act as does not deal with the imposition of taxation, there would be room left for the operation of so much of the second part of s. 55 as provides that a law imposing taxation shall deal with one matter of taxation only with the resulting invalidity of the whole of the Excise Act 1952 because it would impose one tax and deal with another matter of taxation.

I have, however, reached the conclusion that if s. 60 does impose taxation, the tax that it imposes is a duty of excise. I am disposed to think, in keeping with what I have called "the accepted view" that treats a law such as s. 54 as not imposing taxation, that s. 60 is a law of the same character because its operation depends upon the Excise Tariff defining excisable goods and imposing the duties to be paid thereon. It is, moreover, as has already been pointed out, an ancillary provision. If, however, s. 60 should be regarded as itself imposing taxation, I think that the taxation which it imposes is an excise duty and that it is of no importance that what is payable thereunder is therein described as "an amount equal to the amount of the excise duty which, in the opinion of the Collector, would have been payable" in a particular hypothetical case. Assuming that s. 60 itself imposes taxation and taking one illustration of its operation, what is payable is an amount calculated by reference to the value of excisable goods subject to Customs control and not accounted for by a person to whom possession, custody or control of the goods had been entrusted upon the authority of the Customs. What is payable by reason of such a provision, if it imposes taxation, seems to me to fall well within the conception of a duty of excise. However the matter be looked at, therefore, I do not think that s. 55 of the Constitution invalidates s. 60. Consequently, the third question in the case stated should be answered No.

The plaintiff, who is the Collector of Customs, brought an action to recover £2,274 9s. 2d. from the defendant under s. 60 of the Excise Act. The matter came on for hearing before McTiernan J. when the parties agreed upon a statement of facts and his Honour thereupon stated a case for the consideration of the Full Court under s. 18 of the Judiciary Act. Before stating the facts, it is convenient to set out s. 60. By sub-s. (1) it provides that: "Where a person who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the control of the Customs - (a) fails to keep those goods safely; or (b) when so requested by a Collector, does not account for those goods to the satisfaction of the Collector, that person shall, on demand in writing made by the Collector, pay to the Commonwealth an amount equal to the amount of the Excise duty which, in the opinion of the Collector, would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand". Sub-section (2) makes the amount payable under sub-s. (1) a debt due to the Commonwealth and enables it to be recovered by proceedings taken in the name of the Collector. Sub-section (3) makes a statement or averment in the claim or declaration of the Collector evidence of the matter so stated or averred, and sub-s. (4) provides that the section is not to affect the liability of a person arising under any other provision of the Act or under a security given under the Act.

The facts are that the British Australasian Tobacco Co. Pty. Ltd. delivered 295 cartons of manufactured tobacco to the defendant at No. 4 wharf, Circular Quay to be carried by it in one of its ships to Hobart. No excise duty had been paid upon the goods but delivery of them to the defendant at the wharf and the proposed shipment therefrom to Hobart had been duly authorized by the Customs authorities in accordance with the Act and regulations. At all times the goods were excisable goods and subject to the control of the Customs within the meaning of s. 60. After delivery to the defendant they were placed by it in a shed on the wharf, colloquially known as the "dead house", with the knowledge and approval of the Customs authorities. The shed was used not only for the safekeeping of goods subject to the control of the Customs but also for the safekeeping of free goods which were particularly valuable or liable to pillage. It was, however, not a warehouse licensed pursuant to s. 78 of the Customs Act. The key to the store was handed (presumably by the Customs authorities) to the defendant on 17th April 1957 and during working hours it remained in its possession until 24th April 1957. The "usual practice" was for the key to be placed in the Customs office during non-working hours and pursuant to this practice it was placed by one of the defendant's employees in the Customs office at 11 p.m. on 18th April 1957 and remained there over the Easter holidays. Some time between midnight on Easter Saturday and 5 a.m. on Easter Sunday while the key was still in the Customs office, some unknown person forced the door of a switch-room adjoining the store and, having entered the switch-room and broken down a fibroplaster wall between the switch-room and the store, gained access to the store and stole 40 cartons of the tobacco. On 23rd April 1957 the defendant informed the plaintiff in writing of this fact and, on 28th May 1957, the plaintiff wrote the defendant a letter in which he requested it to account for the missing goods to his satisfaction. The letter set out the provisions of s. 60 and gave details of the goods. Further correspondence took place between the parties and, on 19th June 1957, the plaintiff wrote to the defendant stating that it had failed to account for the missing goods to his satisfaction and calling upon the defendant in terms of s. 60 to pay excise duty amounting to £2,274 9s. 2d. The parties are in agreement that the goods were in fact stolen as stated by the defendant.

The first question for consideration is whether at the time when they were stolen the defendant was a person entrusted with their possession, custody or control, having regard to the fact that at the time of the theft the key of the store was deposited at the Customs office. In his statement of claim the plaintiff averred that the defendant was such a person and by s. 60 (3) this averment supplied prima facie evidence of the fact. It does not seem to me that the very meagre information contained in the agreed statement of facts enables a finding to be made to the contrary. The "usual practice" to leave the key at the Customs office during non-working hours may have been due to some requirement laid down by the Customs authorities or may equally have been adopted merely as a convenient safety measure taken by the defendant with the assent of those authorities. It is quite impossible to hold, in the absence of further evidence, that the handing over of the key operated as a constructive delivery to the Customs authorities of the possession, custody or control of the goods and this question must therefore be answered against the defendant.

It was next submitted that findings that the defendant had failed to keep the goods safely or had not accounted for them to the satisfaction of the Collector could not be made. The word "fails" in s. 60 (1) (a) connotes, so it was said, some degree of fault or neglect on the part of the custodian of the goods and none was shown. It was submitted further that, since the goods were in fact stolen and the defendant's explanation that theft accounted for their disappearance was believed by the Collector, the latter was bound to be satisfied that the defendant had accounted for the goods. These submissions necessarily involve determining the true meaning of the sub-section. Its purpose is to protect the revenue by ensuring that excisable goods do not go into consumption by devious means and without excise duty being paid on them. The failure to keep safely, to which s. 60 (1) (a) refers, is not designed to impose upon the custodian an obligation to preserve the goods against all perils. The happening against which they are required to be kept safe is that of going into consumption without payment of duty. In these circumstances I can see no good reason for reading the section as imposing upon the custodian something short of an absolute obligation to preserve the goods against that peril. In one context the word "fails" may import the notion of fault. In another it may mean no more than "omits" or "does not" (Ingram v. Ingram [1] ; per Jordan C.J. [2] ). In the context in which the word is found here, I think the latter meaning should be given to it. If so, there was a failure on the part of the defendant to keep the goods safely since they ceased to be in its custody in circumstances pointing to the probability that they would go into consumption.

1. (1938) 38 S.R. N.S.W. 407; 55 W.N. 163. 2. (1938) 38 S.R. (N.S.W.), at p. 410; 55 W.N. 163.

The question then arises as to the meaning of the words "does not account for those goods to the satisfaction of the Collector" in par. (b) of the sub-section. The use of the word "or" in introducing the paragraph may at first sight appear to create some difficulty but if the purpose of the section is kept in mind I think that difficulty disappears. If the undoubted fact is that a custodian of goods has failed to keep them safe from the danger of going into consumption without payment of duty as, for example, where readily saleable goods have been stolen, par. (b) need not be called in aid by the Collector. But cases may easily be imagined in which the disappearance of the goods leaves it doubtful whether they may have gone into consumption or that it is likely that they will do so. If so, par. (b) may be invoked and the custodian may be required by the Collector to account for the absence of the goods in such manner as to satisfy him that the revenue has not suffered and, in the absence of an explanation which satisfies the Collector of that fact, the obligation to pay imposed by the latter part of the sub-section may be enforced. In the present case, the explanation given by the defendant for the disappearance of the goods was that they had been stolen and the probabilities were, in these circumstances, that they would go into consumption. The defendant failed to safeguard them against that danger and there was no need, in these circumstances, for the Collector to request the defendant to account for them. Nevertheless he did so and the account was not one upon which he was bound to be satisfied that the revenue had not suffered or would not be likely to suffer.

The final questions for consideration relate to s. 55 of the Constitution, the effect of which, so the defendant contends, is to invalidate s. 60. The first limb of s. 55 requires that laws imposing taxation shall deal only with the imposition of taxation and any provision dealing with any other matter shall be of no effect. The second limb provides that: "Laws imposing taxation, except laws imposing duties of customs or of excise, shall deal with one subject of taxation only; but laws imposing duties of customs shall deal with duties of customs only, and laws imposing duties of excise shall deal with duties of excise only". Section 60 of the Excise Act is, so the defendant contends, a law imposing taxation. But the first part of s. 55 affords it no assistance. If s. 60 is a law imposing taxation and the Act in which it is found contains provisions dealing with matters other than the imposition of taxation, the validity of s. 60 would not be thereby affected. It would stand and the other provisions would fall. Accordingly it is upon the second part of s. 55 that the defendant must and does rely. The arguments put on its behalf run in this way. Section 60 imposes a tax. That tax is either a tax other than a customs or excise tax or else it is an excise tax. If it is the former, it infringes the second limb of s. 55 because it deals with more than one subject of taxation. If, on the other hand, it is an excise tax it equally infringes that limb of s. 55 because the statute of which it forms part not only imposes an excise duty but contains machinery provisions governing the assessment, collection and control of excise duties and provisions of this kind cannot be tacked on to an Act imposing an excise tax. In either event the result is invalidation because of non-compliance with the requirements of s. 55. And a law which infringes s. 55 is invalid (Per Dixon J. (as he then was) in Resch v. Federal Commissioner of Taxation [1] ).

The first question is whether s. 60 does impose a tax. The first view that I formed was that it does, but further consideration had led me to think that the obligation imposed by the section is to be regarded rather as an obligation to make good to the Commonwealth the loss of revenue which would have been received by it had the custodian of the goods kept them safely or accounted for them to the satisfaction of the Collector. What is declared to be payable is not the excise duty on the goods but an amount equivalent to that duty and there is, I think, a distinction between an obligation to pay a tax and an obligation to compensate the revenue for the loss of tax which would have been paid had the goods gone into consumption through lawful channels.

The questions asked should be answered: I (a) to I (d) Yes. II Yes. III No.