Deputy Federal Commissioner of Taxation v W R Moran Pty Ltd [1939] HCA 27

Wheat Tax Act 1938 (No. 52 of 1938) - Wheat Industry Assistance Act 1938 aa

(No. 53 of 1938), secs. 6, 7, 10, 14 - Flour Tax Relief Act 1938 (Tas.) (2 Geo. VI. * "4 *™ No. 40). Latham C.J., Rich, Starke,

The scheme of legislation consisting of the Flour Tax Act 1938, the Flour MeTiernan JJ. Tax (Stocks) Act 1938, the Flour Tax (Imports and Exports) Act 1938, the Wheat Tax Act 1938 and the Flour Tax (Wheat Industry Assistance) Assessment Act 1938 (which Acts impose certain taxes on flour and wheat), the Wheat Industry Assistance Act 1938 (which provides for the appropriation of the proceeds of the taxes in payments to the States, and, in sec. 14, for an addi- tional payment to Tasmania of an amount having a direct relation to the tax paid on flour consumed in that State), and the Flour Tax Relief Act 1938 of * the State of Tasmania (providing for the distribution of such additional grant amongst payers of tax on flour consumed in that State) is not invalid as amount-

_ ing to taxation so as to discriminate between States, or as involving a bounty

which is not uniform throughout the Commonwealth, or because the fixing the rates of tax or the determination of the amounts of the payments to be made to States is delegated to an executive authority.

So held by Latham C.J., Rich, Starke and MeTiernan JJ.

Per Evatt J. : The Commonwealth scheme of legislation above referred to invalid because an essential and inseparable feature thereof is taxation dis. criminating between States contrary to sec. 51 (ii.) of the Constitution,

Observations on the relevance on questions of constitutional validity of the - motive of the legislature and the end sought to be attained by the combined _ exercise of various powers of the Commonwealth and the States.

Admissibility of extrinsic evidence in determining the validity of a statute discussed,

Action removed to the High Court under sec. 40 of the Judiciary Act 1903-1937.

In an action brought in a District Court of New South Wales - the defendant, W. R. Moran Pty. Ltd., was sued for the sum of - £85 12s. tax and additional tax, alleged to be due under the Common- _ wealth Flour Tax (Wheat Industry Assistance) Assessment Act 1938 - and the Flour Taa (Stocks) Act 1938. The case was removed to the High Court under sec. 40 of the Judiciary Act 1903-1937, and was referred by Evatt J. to the Full Court.

The only defence raised to the action was that the said Acts, or one of them, was invalid as being ultra vires of the Commonwealth Parliament. ig

In August 1938, at a conference attended by representatives of - the Commonwealth Government and of all the State Governments of Australia, it was agreed that it was necessary to take action to ensure to wheat growers a payable price for wheat. The approved - scheme involved the imposition of an excise duty upon flour by the Commonwealth Parliament. By this means the Commonwealth Government would obtain funds out of which moneys could be paid to assist wheat growers in general, and also to give relief to distressed wheat growers. It was part of the plan that special treatment - should be given to Tasmania on account of the special circumstances of that State. Those special circumstances consisted in the fact that Tasmania alone, among the States of the Commonwealth, imports wheat from other States. The quantity of wheat produced -

n Tasmania is relatively very small and, accordingly, the Tasmanian 4. ©. or A. community, though it would bear the excise duty on flour by paying es increased prices for bread &c., would receive very little money by Derury J A . f FEDERAL 'way of moneys paid or other assistance given to the small number - Comms-

of Tasmanian wheat growers. eee Another element in the scheme involved the fixing by or under (NS:W.) 'State legislation of prices for flour and/or bread. The object was W. R. Moran to prevent undue exploitation of consumers. ee All the Parliaments of Australia combined to give effect to the

plan. It was thought that by the co-operative action of all the Parliaments (and only by such co-operative action) the desired

The Commonwealth Parliament passed three Acts imposing taxes

on flour and one imposing a tax upon wheat. The, first was the

Plowr Tax Act 1938, which imposed a tax upon flour manufactured

'in Australia and sold or used in the manufacture of other goods.

The second, the Flour Tax (Stocks) Act 1938, imposed a tax upon

flour held in stock upon a specified date. The third, the Flour Tax

(Imports and Exports) Act 1938, imposed a tax upon flour and

biscuits &c. imported into Australia and upon wheat exported from

Australia after a date to be fixed by proclamation. Taxes under

'these Acts would, as a general rule, be paid by millers. The Acts

were designed to raise money by taxing flour and flour products so

as to form a fund which would provide the Commonwealth with

_ means of paying moneys to wheat growers, so as to provide a payable

price for wheat. The tax was fixed upon the basis that 5s. 2d.

a bushel on rails at Williamstown was a payable price, and the Acts 'Mentioned were designed to produce a sum representing the difference

between any lower price and that price, so that the wheat grower

would receive payment upon the basis of 5s. 2d. per bushel. If,

however, the price of wheat went above 5s. 2d. per bushel at Williams-

town, it was part of the scheme that a tax should be imposed upon

wheat so as to form a fund from which moneys could be paid, not

to wheat growers, but to millers. This tax was imposed by the fourth

, the Wheat Taw Act 1938. The Flour Tax (Wheat Industry

istance) Assessment Act 1938 provided the necessary machinery

H.C.orA. The Commonwealth Parliament enacted the Wheat Indu

risen Assistance Act 1938 as another necessary part of the scheme.

atl Act recites the substance of the plan outlined above. The preamb Comms. of the Act refers to the conference held in August 1938, and deelar Taxation that the Commonwealth and States have agreed to co-operate in ee) order to give effect to the scheme, and that the State Parliaments Nee ay have passed legislation providing for the fixing of prices for flour _ - "sold for home consumption in Australia. All the State Parlian had in fact either passed special Acts enabling them to fix prices

flour and bread or already had an applicable statute in operation. :

The defendant's principal objection was that the scheme invol

an imposition of a tax, namely, an excise duty, which infring sec. 51 (ii.) of the Constitution. Sec. 51 (ii.) provides that Commonwealth Parliament shall have power to make laws y respect to "taxation ; but so as not to discriminate between Stat or parts of States."

The course adopted was to impose a tax upon flour in gene' terms, without any discrimination between States, and then » Lo distribute the amount of the proceeds among the States for allocation. to wheat growers, but with a special Commonwealth grant to the special case of Tasmania.

The taxing and assessment Acts dealt with the raising of money by taxation. The appropriation of money towards the de objects was made by the Wheat Industry Assistance Act 1938. Act provides for the payment of the proceeds of the flour tax (which go into the consolidated revenue fund under sec. 81 of Constitution) out of that fund into a wheat stabilization fund.

to the States of amounts proportionate to the production of wl in each State. Sec. 6 (7) provides that these grants to the States

to the quantity of wheat sold or delivered for sale by each whea grower during the relevant year. Sec. 7 of the Act provides

specified other sums shall be paid, in the first year to only fout named States. It is a condition of these latter special payn that these amounts shall be applied in the relief of distressed wl

wheat growers from unsuitable land. After the first year of operation f the scheme and during the following four years, the amounts to paid to the States under sec. 7 are to be determined by the ister administering the Act (sec. 7 (3) ).

The special provision for Tasmania is contained in sec. 14 of the

amount granted to Tasmania under sec. 6 or sec. 7, a further sum, of such amount as the Minister should determine, shall be paid to the State of Tasmania in each year by way of financial assistance. 'This section is subject to a proviso that the amount paid to Tasmania inany year shall not be greater than the sum (if any) by which the amount collected in that year under the assessment Act in respect of flour consumed in Tasmania exceeds the total amount paid to 'Tasmania in respect of the year by way of grants under sec. 6 and sec. 7 of the Act. This proviso imposes a maximum limit upon the amount to be paid to Tasmania - the difference between what the community of Tasmania receives under the other provisions of the ssistance Act and the amount which it pays under the taxation Acts. The assistance to wheat growers was regarded as benefiting Tasmania to a very small degree, because, as already stated, there e very few wheat growers in Tasmania, but the people of Tasmania consume as much bread per head as the people in any other part of 'the Commonwealth. Thus sec. 14 was devised as a means, not mathematically precise, but roughly accurate enough, of putting all arts of Australia, including Tasmania, upon substantially the same oting. The Tasmanian Parliament passed an Act entitled the Flour Tax élief Act 1938. This Act and all the Commonwealth Acts mentioned ere assented to on the same day, 2nd December 1938. This Act, e the other Acts, did not disguise its object in any way. The mble recited that the Commonwealth Wheat Industry Assistance Act provided for the payment to the State of moneys by way of financial assistance during any period in respect of which a tax was imposed upon flour. The next recital was: " Whereas it is desirable the moneys so granted to this State should be applied to the relief of persons paying flour tax upon flour for consumption in this

wers, or, in subsequent years, in meeting the cost of transferring H- ©. or A.

Wheat Industry Assistance Act. Tt provides that in addition to any W. R. Moray

State." The Act provided that persons who paid flour tax to t Commonwealth might apply to a State official for relief in of the flour tax which they had paid. The evidence showed tl

Act by the State to Tasmanian taxpayers, and to persons in 0 parts of Australia who, having paid tax upon flour in those other States, subsequently exported the flour to Tasmania, where it used. The result of this whole scheme of Commonwealth and State le lation is that a Commonwealth excise duty is imposed upon flow which is paid upon the same basis by persons in all States. proceeds of the duty go into the Commonwealth consolidated reve An equivalent sum is then taken from the consolidated revenue is paid by the Commonwealth by way of financial assistance to States of the Commonwealth, upon condition that the States ap ply the moneys in the assistance and relief of wheat growers. In h case of Tasmania, however, a special grant is made by the Common- wealth which is not subject to any Commonwealth statutory ditions, but which, in fact, is applied, and which it was kn would be applied, by the Government of Tasmania in paying ba to Tasmanian millers and others nearly the whole of the flour tax paid by them in respect of flour consumed in Tasmania. Further facts and relevant statutory provisions appear in reasons for judgment hereunder. Upon the matter being called on for hearing before the Full Court of the High Court, the States of New South Wales, Victoria, Sot Australia and Tasmania obtained leave to intervene. s

Mason K.C. and W. J. V. Windeyer (with them Leslie), for defendant. The assessment Act and all the taxing Acts, that i the Flour Tax (Wheat Industry Assistance) Assessment Act 19 the Flour Tax Act 1938, the Flour Tax (Stocks) Act 1938, the Flour Tax (Imports and Exports) Act 1938, and the Wheat Tax Act 19 are part of the scheme referred to in the preamble to the Wheat Industry Assistance Act 1938. That scheme includes the legis also referred to in that preamble as having been passed by

Parliaments of the various States, e.g., the Flour Tax Relief Act 1938 (Tas.). It is significant that all these statutes came into force nthe same day. The scheme involves: (a) an excise duty which criminates between States by reason of sec. 14 of the Wheat Industry Assistance Act; (b) bounties under sec. 6 of that Act, which are not uniform by reason of sec. 10 of the Act; and (c) grants under sec. 7 of the Act, which are not valid under sec. 96 of the Constitution because a Minister and not the Parliament determines the amount and conditions of the grants. Although it may have been the intention to assist wheat growers, the validity of the tax upon flour is disputed because the way in which it is levied d appropriated is not in accordance with the Constitution. The eme offends against secs. 51 (ii.), 96 and 99 of the Constitution. Having regard to the fact that it is a wheat tax, and also to the that the whole object of the legislation is to produce a home consumption price for wheat, what is proposed is a bounty to wheat growers raised by an excise tax which discriminates, and the bounty is not, by reason of sec. 10 of the Wheat Industry Assistance Act, uniform throughout the Commonwealth. Discrimination brought about by means of a scheme involving a number of Acts is just as bad as if the discrimination were brought about by one Act only. For the purpose of determining the effect and validity of the Wheat Industry Assistance Act, and particularly sec. 14, the court is entitled "to have regard to the proceedings of the conference referred to in the preamble to that Act (Attorney-General for Alberta v. Attorney- eral for Canada (1) ). Although the Wheat Industry Assistance Act refers in secs. 6 and 14 to " grants of financial assistance," the various Acts must be examined in order to ascertain their " pith nd substance " or " true nature and character " (Shannon v. Lower Mainland Dairy Products Board (2); Attorney-General for Alberta v. Attorney-General for Canada (3); Hammer v. Dagenhart (4) ) and. "the real object of arming the Minister with the power" (James v. Cowan (5)) of making grants to Tasmania under sec. 14 of the Wheat Industry Assistance Act. In making that examination regard

(I) (1939) A.C. 117, at pp. 130-133. (4) (1918) 247 U.S. 251; 62 Law. Ed.

(3) (1939) A.C. 117. (5) (1988) A.C. 542, at p. 558; 47 C.LR. 386, at p. 390,

(a) all enactments forming part of the legislat scheme (Attorney-General for Ontario v. Reciprocal Insurers In re Insurance Act of Canada (2); United States v. Butler (3); R The Commonwealth v. McKay (4); Tek OF Alberta v. Attorney-General for Canada (5) );

Larnam C.J. The court, by a majority, holds that the defence _ to the action fails and that judgment should be entered for the | plaintiff for the amount claimed. The reasons for judgment will be delivered later. '

The following written reasons for judgment were delivered : -

Larnam C.J. In this action the defendant is sued for a sum of - £85 12s. tax and additional tax, alleged to be due under the Feder Flour Tax (Wheat Industry Assistance) Assessment Act 1938 and the Flour Tax (Stocks) Act 1938. The case has been removed to the High Court under sec. 40 of the Judiciary Act 1903-1937 and has been referred by Evatt J. to the Full Court. The plaintiff is entitled to judgment for the amount claimed unless the defendant establishes the only defence which is raised, namely, that the said Acts are, or one of them is, invalid as being ultra vires of the Commonwealth Parliament. -

In August 1938 at a conference attended by representatives of the Commonwealth Government and of all the State Governments of Australia it was agreed that it was necessary to take action ensure to wheat growers a payable price for wheat. The app

Commonwealth Parliament. By this means the Commonwi Government would obtain funds out of which moneys could be to assist wheat growers in general, and also to give relief to dist1 E wheat growers. It was part of the plan that special treatme

should be given to Tasmania on account of the special circumsta

hat Tasmania alone, among the States of the Commonwealth, imports wheat from other States. Apparently all the wheat required for flour milling in Tasmania has to be brought from other States. 'The quantity of wheat produced in Tasmania is relatively very and accordingly the Tasmanian community, though it would

would receive very little money by way of moneys paid or other assistance given to the small number of Tasmanian wheat farmers. Another element in the scheme involved the fixing by or under State legislation of prices for flour and/or bread. The object was to prevent undue exploitation of consumers.

_ All the Parliaments of Australia combined in order to give effect to the plan. It was thought that by the co-operative action of all

the Parliaments (and only by such co-operative action) the desired tesult could be achieved.

_ The Commonwealth Parliament passed three Acts imposing taxes on flour and one imposing a tax upon wheat. The first was the lour Tax Act 1938, which imposed a tax upon flour manufactured 'in Australia and sold or used in the manufacture of other goods. he second, the Flour Tax (Stocks) Act 1938, imposed a tax upon flour held in stock upon a specified date. The third, the Flour Tax (Imports and Exports) Act 1938, imposed a tax upon flour and biscuits &c. imported into Australia and upon wheat exported from Australia after a date to be fixed by proclamation. Taxes under 'these Acts would, as a general rule, be paid by millers. The Acts ere designed to raise money by taxing flour and flour products so '0 form a fund which would provide the Commonwealth with of paying moneys to wheat farmers, so as to provide a payable e for wheat. The tax was fixed upon the basis that 5s. 2d. a el on rails at Williamstown was a payable price, and the Acts tioned were designed to produce a sum representing the difference between any lower price and that price, so that the farmer would ive payment upon the basis of 5s. 2d. If, however, the price of at went above 5s. 2d. at Williamstown, it was part of the scheme

of that State. Those special circumstances consisted in the fact H.©. or A.

Ww Deputy FEDERAL Comnnis- SIONER OF TAXATION a)

bear the excise duty on flour by paying increased prices for bread, &c., W. R. "Mona

Ww Deputy FEDERAL Commns- SIONER OF Taxation ee)

tax was imposed by the fourth Act, the Wheat Tax Act 1938. Flour Tax (Wheat Industry Assistance) Assessment Act 1938 prov the necessary machinery for the collection of these taxes. f The Commonwealth Parliament enacted the Wheat Indus Assistance Act 1938 as another necessary part of the scheme. Act recites the substance of the plan which I have outlined.

and bread or already had an applicable statute in operation. Upon the argument in this case it was objected that the e should not look outside the four corners of the statutes in questi and that the proceedings of the conference were irrelevant. Wheat Industry Assistance Act, however, expressly refers in preamble to the conference, and I am, therefore, of opinion there can be no objection to looking at the record of what was do at the conference. An examination of that record does not a anything to what is apparent upon the face of the Federal and statutes. These statutes show that the Commonwealth and t State Governments agreed to ask their Parliaments to pool th constitutional powers for the purpose of bringing about a which admittedly neither the Commonwealth Parliament alone nor the State Parliaments alone could achieve. The question which arises is whether the Commonwealth Parliament, in providing it contribution to this scheme, has infringed the Constitution. The principal objection is that the scheme involves an impositit of a tax (namely, an excise duty) which infringes sec. 51 (ii.) of Constitution. Sec. 51 (ii.) provides that the Commonwealth Parli ment shall have power to make laws with respect to " taxation; but so as not to discriminate between States or parts of States." As I have already stated, it was part of the scheme that spe treatment should be provided for the special circumstances of Tas- mania. It was obvious that the Commonwealth Parliament could not impose an excise duty and exclude Tasmania from the A

The taxing and assessment Acts dealt with the raising of money

lonstitution) out of that fund into a wheat industry stabilization fund. The money in this fund is to be applied (sec. 6 (6) ) in making ayments to the States of amounts proportionate to the production of wheat in each State. Sec. 6 (7) provides that these grants to the States shall be paid upon condition that the amount so paid to a State shall be distributed to the wheat growers in the State in p roportion to the quantity of wheat sold or delivered for sale by ich wheat grower during the relevant year. Sec. 7 of the Act provides that specified other amounts shall be paid, in the first ar, to only four States, namely, New South Wales, Victoria, South Australia and Western Australia. It is a condition of these latter special payments that these amounts shall be applied in the relief of distressed wheat growers, or in subsequent years, in meeting the st of transferring wheat growers from unsuitable land. After the st year of operation of the scheme and during the following four years, the amounts to be paid to the States under sec. 7 are to be

the State of Tasmania (not to the millers of Tasmania) in each year by way of financial assistance. This section is subject to a proviso that the amount paid to Tasmania in any year shall not be greater than the sum (if any) by which the amount collected in that year

der the assessment Act in respect of flour consumed in Tasmania xceeds the total amount paid to Tasmania in respect of the year

H.C. or A. by way of grants under sec. 6 and sec. 7 of the Act. This resi) imposes a maximum limit upon the amount to be paid to Ta: Maid - the difference between what the community of Tasmania Comms. under the other provisions of the assistance Act and the a Trauos Which it pays under the taxation Acts. The assistance to (NS.W.) growers was regarded as benefiting Tasmania to a very small dk because (as already stated) there are very few wheat growers Tasmania, but the people of Tasmania consume as much bread

• head as the people in any other part of the Commonwealth. sec. 14 was devised as a means, not mathematically precise, but roughly accurate enough, of putting all parts of Australia, includ Tasmania, upon substantially the same footing. It is con
  that the payment to the State of Tasmania of an amount which bears

a relation (namely, by way of maximum limit) to the amount of.

excise duty paid on flour, really amounts to a prohibited discrimina- tion in favour of Tasmania. 3

The Tasmanian Parliament passed an Act entitled the Flour Ta Relief Act 1938. This Act and all the Federal Acts mentioned were assented to on the same day, 2nd December 1938. This Act (like the other Acts) did not disguise its object in any way. The preamble recited that the Federal Wheat Industry Assistance Act provided fo the payment to the State of moneys by way of financial assis

during any period in respect of which a tax was imposed upon flot

paying flour tax upon flour for consumption in this State." Act provided that persons who paid flour tax to the Commonw: might apply to a State official for relief, and might thereupon ob a payment by way of relief in respect of the flour tax which they had paid. The evidence shows that, in fact, ninety per cent of the fl tax paid was repaid under this Act by the State to the Tasm taxpayers, and to persons in other parts of Australia who, hay paid tax upon flour in those other States, subsequently exported flour to Tasmania, where it was used.

The result of this whole scheme of Federal and State legislation is that a Federal excise duty is imposed upon flour which is p upon the same basis by persons in all States. The proceeds of the

duty go into the Federal consolidated revenue. An equivalent sum 'is then taken from the consolidated revenue and is paid by the

Commonwealth, upon condition that the States apply the moneys in the assistance and relief of wheat growers. In the case of Tas- ania, however, a special grant is made by the Commonwealth which is not subject to any Federal statutory conditions, but which, in fact, is applied, and which it was known would be applied, by the Government of Tasmania in paying back to Tasmanian millers and others nearly the whole of the flour tax paid by them in respect of flour consumed in Tasmania.

It is now possible to deal with the principal contention of the defendant, based upon sec. 51 (ii.) of the Constitution. Under . 51 (ii.) the Commonwealth Parliament can undoubtedly tax flour as it has done in the various taxation Acts to which I have referred. But the power to legislate with respect to taxation is subject to the condition expressed in the words "but so as not to discriminate

amble) are read together, it is evident that the amount paid in 'ion by persons in Tasmania is to be refunded to the Government Tasmania for repayment to them, so that there is a discrimination

of it, back to Tasmania. But sec. 51 of the Constitution es only to the powers of the Commonwealth Parliament, and provision prohibiting discrimination affects and can affect that

scriminates between States or parts of States, it is not rendered alid by the condition attached to sec. 51 (ii). The Federal taxation Acts themselves plainly do not discriminate between States. They are therefore not affected by the condition contained es not arise from any discrimination in any law passed by the al Parliament " with respect to taxation." The Wheat Industry

Assistance Act is not an Act with respect to taxation. It is an Ac appropriating money. It provides, not for the collection, but the expenditure of money. There is no provision in the Constitut to the effect that appropriation Acts must not discriminate be States or that Federal expenditure in the several States must equal in any sense. Such a provision would obviously encounti very grave practical difficulties.

What is said to be the discrimination in favour of Tasman

wealth legislation provides for the repayment of any money to an Tasmanian taxpayer. It provides only for the payment of a s

to the Government of Tasmania. The Government of Tasmani has, with the authority of the Parliament of Tasmania, devoted this money to giving relief to Tasmanian taxpayers. But such action cannot be an infringement of sec. 51 (ii.), because that sectic does not apply to the Parliament of Tasmania. In my opin there would be nothing unlawful or invalid in any State ena legislation providing for the repayment to its citizens of mon

Such a law might be open to political objection, but no remedy - could be obtained by any objection in the courts. The enactment of such a law could not affect the validity of any Act passed by Parliament of the Commonwealth. It may be added that a Parliament could achieve much the same practical result in cases by reducing its own taxes. The validity of such a reduc would not be open to doubt.

A somewhat similar question to that which arises under the objection was answered in Colonial Sugar Refining Co. Ltd. v. l (1). The Commonwealth Parliament imposed uniform duties of excise upon sugar but subject to exemptions so far as goods borne customs or excise duties under State legislation. In Queens-

the amounts payable by way of excise duty to the Commonw varied in the case of different States. But this result was brou about not by the Federal legislation, but by the State legislation. Their Lordships of the Privy Council say: '" The rule laid down by

he Act is a general one, applicable to all States alike, and the fact hat it operates unequally in the several States arises not from any- thing done by the Parliament, but from the inequality of the duties 'imposed by the States themselves" (1). In that case the resulting inequality was an effect of past legislation, and the inequality in esult was, therefore, obvious ab initio. The case is, therefore, a _ stronger one than the present case, where it is open to the Tasmanian arliament, as a matter of law, to repeal the Flour Tax Relief Act and to alter the manner of expending the money received from the Commonwealth under the Wheat Industry Assistance Act. The defendant relied very strongly upon the case of Attorney- eral for Alberta v. Attorney-General for Canada (2). The principle which it was sought to derive from that case was that a statute, apparently valid when considered by itself, might nevertheless be eld to be invalid if it were part of a " 'prohibited purpose. The case cited provides one of many illustra- tions of the difficulties arising from the distribution of Dominion

and Provincial legislative powers under the British North America Act

gislative power of the Dominion Parliament. Sec. 92 places certain atters within the exclusive legislative power of the Provincial Parliaments. But reality does not satisfactorily respond to the statutory fiat. The matters mentioned in the two sections overlap. cordingly very difficult problems arise in the case of Canada with ect to the category to which legislation should be assigned. is precise problem does not arise in Australia, where the Constitu- tion does not assign exclusive powers to the Commonwealth and so exclusive powers to the States. In the present case no question 'of judicial selection as between mutually exclusive categories arises, Inthe next place it may be noted that the Alberta Case (2) dealt with a legislative power which was defined by reference to purpose. 'The power was conferred upon the Provincial Parliament by sec.

(1) (1906) A.C., at p. 367. (2) (1939) A.C. 117. (3) (1939) A.C., at p. 130.

of the challenged legislation was not the raising of any revenue b taxing banks. The purpose was plainly a purpose of putting banks out of business. But " banking" was one of the subjects. i to which the Dominion Parliament had exclusive legislative power under sec. 91. The Provincial Act was therefore invalid. In the present case no consideration of the purpose of the Commonwe Parliament is relevant. This, indeed, is the general rule. If power is not defined by reference to purpose, the element of pu is irrelevant. In Barger's Case (1) all the justices took this vi See per Griffith C.J., Barton and O'Connor JJ. (2), per Isaacs J. and per Higgins J. (4) - See also James v. Cowan (5). Sec. 51 of the Commonwealth Constitution makes no reference to any purpose of the Commonwealth Parliament. It confers a power to m laws with respect to taxation, but so as not to discriminate betw States or parts of States. The condition relates only to laws respect to taxation. If such a law does in fact discriminate betw States, it is not within the power granted. The absence of a purpo: to discriminate would be nothing to the point. If such a law do not in fact so discriminate, the presence of a purpose to discrimi would equally be nothing to the point. The laws with respect taxation, that is, the taxing Acts and the assessment Act, do discriminate between States. Thus the condition of sec. 51 (ii. not infringed. In my opinion the Alberta Case (6) does not assis the plaintiff.

In my opinion, for the reasons given, neither the Flour (Stocks) Act 1938 nor any other of the Acts mentioned is open the objection that it is legislation with respect to taxation wl discriminates between States.

It is further objected that the payments made under the W1 Industry Assistance Act are bounties on the production or exp goods, and that they are not uniform. Sec. 51 (iii.) of the Comn wealth Constitution provides that the Parliament shall have po to make laws with respect to bounties on the production or export of goods "but so that such bounties shall be uniform throughout the Commonwealth." In support of this objection reference i

(1) (1908) 6 C.L.R. 41. (4) (1908) 6 C.L.R., at pp. 119, 1 (2) (1908) 6 C.LR., at p. 67. (5) (1930) 43 C.L.R. 386, at p. 421. (3) (1908) 6 C.LR., at pp. 89, 92, 93. (6) (1939) A.C. 117. a

made to the fact that the grants made to the States under secs. 6 and 7 vary in amount, and that, under sec. 10, the Governor-General may suspend payments if he is satisfied that State legislation is amended, or that action is taken under State legislation, so as to affect prejudicially the position of wheat growers in the State in respect of wheat sold for home consumption in Australia. The same section gives power to the Governor-General to suspend payments to a State if the State has not taken steps to adequately protect consumers of flour &c. against excessive prices. In my opinion this objection fails for several reasons.

Tn the first place, the payments made by virtue of the Wheat Industry Assistance Act are payments made to States upon condition that the States shall pay moneys to wheat growers. The payments made by the Commonwealth are not bounties upon either the pro- duction or the export of goods. They are payments by way of financial assistance to States, subject to terms and conditions fixed by the Commonwealth Parliament. The Federal Acts do not authorize any payment by any Federal authority to any wheat "grower in any State. In the second place, although the amount paid to each State is determined by the amount of wheat produced in the State (Wheat Industry Assistance Act, sec. 6 (6) ), the moneys are to be paid by the State to wheat growers "in proportion to the quantity of wheat sold or delivered for sale." Thus a wheat grower who receives a payment from a State does not receive it in respect of wheat produced or exported, but only in respect of wheat which he sells or delivers for sale. For example, he would receive no payment in respect of seed wheat retained out of his harvest. Finally, every wheat grower in all the States is treated in the same way. "in proportion to the quantity of wheat sold or delivered for sale by" him (Wheat Industry Assistance Act, sec. 6 (7)). Thus, if it were necessary that these payments should be uniform, that condition would be satisfied. The payments for the -Telief of distressed wheat growers and for taking them off unsuitable land are plainly not bounties on the production or export of goods. Thus the objection based upon sec. 51 (iii.) of the Constitution fails at all points.

Ww Derury FepEraL Commis- SIONER OF TaXaTION (NS.W.)

The defendant further objects that the provisions for grants to States are invalid because the Minister, and not the Commonwealt Parliament, determines the amount and the conditions of the Thus, under sec. 7 of the Wheat Industry Assistance Act, the Min after the first year, determines the amount to be received by States, and the Minister must approve the method of distribut of moneys for transferring distressed wheat farmers from unsuitab land (sec. 7 (5) ). Further, under sec. 10, the Governor-Gen may suspend payment altogether in certain events, and under 14 the Minister, subject to a maximum limit, determines the amount to be paid to Tasmania.

In my opinion, none of these objections, even if well founded as objections to the validity of these sections, could affect the validit of the taxation Acts. Even if the provisions as to the distributi of the funds established under the Wheat Industry Assistance were invalid, that invalidity would affect only the expenditure o moneys under that Act, and not the collection of moneys under various flour taxation Acts. Although the Acts are all dir towards the assistance of wheat farmers, and in a readily intelligil sense form part of one scheme, there is nothing to show that Parl ment intended that the tax should not be collected if any of provisions for expenditure of money out of the consolidated revenue _ fund, augmented by the proceeds of the tax, should prove to be invalid. An analogous case may be suggested. Parliament mi ; provide by an appropriation Act for the expenditure of, let it b ; supposed, a certain proportion of the moneys collected by way of income tax. If those provisions for appropriation were invalid, I do not think that it could be contended that therefore the whole or a part of the income taxation legislation of the Commonwealth invalid.

But, in the second place, the objections are, in my opinion, well founded. The grants made by the Wheat Industry Assistan Act are made by virtue of the power conferred on the Commonwea Parliament by sec. 96 of the Constitution, which is as follows "During a period of ten years after the establishment of the Com- monwealth and thereafter until the Parliament otherwise provide

terms and conditions as the Parliament thinks fit." The words of this section show that Parliament may grant financial assistance to a single State under this power and may therefore discriminate between States in making grants. They also show that the Parlia- ment has the fullest power of fixing the terms and conditions of any grant made under the section. Parliament does fix the terms and

determine such terms and conditions. It is too late now to argue that terms and conditions determined by a Minister under such legislation are not determined by the Parliament (Powell v. Apollo Candle Co. (1); Bazter v. Ah Way (2); Roche v. Kronheimer (8); Victorian Stevedoring and General Contracting Co. Pty. Ltd. and Meakes v. Dignan (4); Radio Corporation Pty. Ltd. v. The Common- wealth (5) ). Further, the case of Victoria v. The Commonwealth (6) (the Roads Case) is conclusive against the defendant upon this point. It was there held, by a court of seven justices, that the Federal Aid s Act 1926 was a valid enactment, "being plainly warranted

provisions of the agreements required the Minister to be satisfied as to various matters before he was bound to make payments. It was argued that " the terms and conditions referred to in sec. 96 be terms and conditions imposed by the Parliament itself

_ Sec. 96 is a means provided by the Constitution which enables the monwealth Parliament, when it thinks proper, to adjust ualities between States which may arise from the application of

(1) (1885) 10 App. Cas. 282. (2) (1909) 8 GER. 626.

(3) (1921) 29 C.L.R. 329. (7) (1926) 38 CLLR, at p. 406. (1931) 46 C.L.R. 73. (8) (1926) 38 C.L.R., at p. 405,

conditions of the grant if, by legislation, it authorizes a Minister to W. R. Moran

development and wealth. Discrimination is prohibited in laws w respect to taxation (sec. 51 (ii.). Bounties must be uniform 51 (iii.) ). Laws or regulations of trade, commerce or revenue mu not give preference to one State or part thereof over another or part thereof (sec. 99). But these "equal" laws may produ very unequal results in different parts of Australia. A uniform law may confer benefits upon some States, but it may so operate as to amount to what is called "a Federal disability" in other State Sec. 96 provides means for adjusting such inequalities in accordance with the judgment of Parliament. That section is not limited any prohibition of discrimination. There is no general prohibitio in the Constitution of some vague thing called " discrimination,' There are the specific prohibitions or restrictions to which I ha referred. The word " discrimination" is sometimes so used as imply an element of injustice. But discrimination may be just unjust. A wise differentiation based upon relevant circumstances a necessary element in national policy. The remedy for any a of the power conferred by sec. 96 is political and not legal in chara

It was also objected that as the object of the provision in sec. 14 of the Wheat Industry Assistance Act enabling the minister to special financial assistance to Tasmania was to make it possible Tasmania to refund the tax to Tasmanian taxpayers, the " purpose " of that Act was to make possible a discrimination betwe the States in breach of sec. 51 (ii.) of the Constitution.

This objection is, in my opinion, met by what I have already sa namely, that the taxation legislation of the Commonwealth does not discriminate between States, that appropriation Acts of the Comm a wealth are not subject to sec. 51 (ii.) of the Constitution, and legislation by the State of Tasmania is not subject to any limita arising from that section.

The regulations under which Tasmania distributed the n received from the Commonwealth provided that taxpayers enter into a bond to repay the amount received by way of relief if they exported from Tasmania to other States flour upon which tax

trade contrary to sec. 92 of the Constitution. But even if the regula- tions which Tasmania has chosen to make are inconsistent with sec. 92, their invalidity cannot have the effect of making any Common- wealth legislation invalid. It would, I think, be impossible to hold that, because a State government elected to make certain regulations under a valid State Act, Commonwealth legislation, not referring to

invalid. Commonwealth statutes are not at the mercy of State legislatures or governments in the manner suggested.

The only remaining objection of the defendant is based upon provisions under the flour taxation Acts which enable the Minister, in accordance with a recommendation from the Wheat Stabilization Committee established under the Wheat Industry Assistance Act, to fix the amount of tax. The amount of tax, within a limit, is to be determined by the difference between the actual price of wheat and 5s, 2d. per bushel on rail at Williamstown, the difference in wheat ices being translated into difference in flour prices: See, for example, Flour Tax (Stocks) Act, sec. 5. The objection is that the Minister, and not Parliament, fixes the tax. The same objection s taken in Powell v. Apollo Candle Co. (1). In that case an Order in Council issued under the Customs Regulation Act 1879, of New South Wales authorized the Governor, acting upon the opinion of the Collector of Customs, to fix the rate of duty upon imported articles. It was objected that the power of taxation was vested by he Constitution in Parliament and not in the Governor. Their Lordships of the Privy Council said: - "It is argued that the in question has been imposed by the Governor, and not by the gislature, who alone had power to impose it. But the duties levied under the Order in Council are really levied by the authority of the Act under which the order is issued. The legislature has not parted its perfect control over the Governor, and has the power, of 'course, at any moment, of withdrawing or altering the power which they have entrusted to him. Under these circumstances their hips are of opinion that the judgment of the Supreme Court wrong in declaring sec. 133 of the Customs Regulation Act 1879 e beyond the power of the legislature " (2). This case was followed

(1) (1885) 10 App. Cas. 282. (2) (1885) 10 App. Cas., at p. 291.

Deputy FEDERAL Commas- SIONER OF 'TAXATION (N.S.W.)

or dependent upon such regulations in any way, could be rendered W. R. Moray

1939, Ww Depury FEDERAL Commis- SIONER OF TAxaTION (N.S.W.)

HIGH COURT L193 and applied in this court in Nott Bros. & Oo. Ltd. v. Barkley

where Isaacs J. (2) described the same objection as "a cardinal error," saying that the Privy Council "had for ever settled th question in Powell v. Apollo Candle Co." (3). Accordingly, my opinion, this objection fails. I have not referred to some arguments which were addressed to the court with respect to the admissibility of certain evidence, have said that the reference in the preamble of the Wheat Ind Assistance Act to the conference of Premiers made the report of proceedings at that conference admissible. But I do not think this fact is important in the present case. Federal and State legis lation passed after the conference very plainly carries out the genet scheme which the conference desired. But this circumsta appears to me to be irrelevant. If the statutes carry out the schem their validity is determined by what they in fact do and the p arranged scheme is irrelevant. If the statutes do not carry out the scheme, their validity is still determined by what the statutes - in fact do and again the scheme is irrelevant. Evidence was tendered - of statements by the Treasurer of the Commonwealth contained in - minutes approved by him as to the basis of the grants to Tasmania. - These minutes show that the Treasurer was carrying out the scheme according to its intention, but the validity of the statute under which he acted could not be affected by what the Treasurer purported to do under the statute, if what he did was not authorized by the statute. If what he did was authorized by the statute, then the question is whether a statute conferring such authority is valid. Thus this evidence also does not appear to me to be important. I do, however, agree that, where the question of the validity of a statute is raised, a declaration by parliament as to the character of © the statute cannot be accepted by a court as conclusive in relation to the question of validity. There is ample authority for this state- ment in decisions of the Privy Council. See Shannon v. Lower Main- land Dairy Products Board (4), citing Gallagher v. Lynn (5): In the case of a parliament of limited powers " the legislation must not under the guise of dealing with one matter in fact encroach upon -

(1) (1925) 36 C.L.R. 20. (3) (1885) 10 App. Cas. 282. (2) (1925) 36 C.LR., at p. 29. (4) (1938) A.C., at p. 720. (5) (1937) A.C. 863, at p. 869.

Reciprocal Insurers (1): '" Where the law-making authority is of a limited or qualified character, obviously it may be necessary to examine with some strictness the substance of the legislation for the purpose of determining what it is that the legislature is really doing." Reference may also be made to In re Insurance Act of Canada

the forbidden field." See also Attorney-General for Ontario v. H.C. or A.

(2), where their Lordships inquired whether an amendment was or W. R. Moray

was not "a genuine amendment " of the law or really an attempt by a soi-disant amendment to deal with a matter which was not within the power of the legislature; and reference is made to a " false definition " intended to give a colour of validity to a statute which was, in truth, invalid (3). It is also well settled in the United States of America that the mere declaration by a legislature that the subject matter of the legislation falls within a particular category cannot be accepted as conclusive when a question of the validity of the statute arises: See, for example, Tyson & Brother v. Banton (4).

For the reasons given, I am of opinion that the defences to the action fail, and that there should be judgment for the plaintiff for the amount claimed.

Ricu J. I have had the opportunity of reading the judgment of the Chief Justice and concur in it.

_ Srarke J. These proceedings commenced in the District Court

at Sydney in New South Wales. The claim was for £85 12s., being the first instalment and additional tax for late payment payable to the Crown under the Flour Tax (Stocks) Act 1938, No. 50, and Flour Tax (Wheat Industry Assistance) Assessment Act 1938, No. 48. The only defence raised was that the Acts were beyond the power of the Commonwealth Parliament. The proceedings were then removed into this court under sec. 40 of the Judiciary Act. Evidence was taken before this court, both documentary and oral, but all Subject to objection and pursuant to the power contained in the Judiciary Act, sec. 18, and a direction was given that the case be argued before the Full Court.

(1) (1924) A.C., at p. 337. (3) (1932) A.C., at p. 51. (2) (1932) A.C., at p. 49. (4) (1927) 273 U.S. 418 ; 71 Law. Ed. 718.

The preamble to the Wheat Industry Assistance Act 1938, No. sets forth the circumstances surrounding the imposition of the It is as follows : - Whereas at a conference between the Minister of the Commonwealth and the Premiers of the States hel Canberra, at the request of the Premiers, on the twenty-ninth day

operation a scheme to ensure to wheat growers a payable price f wheat: And whereas the Premiers on behalf of their respe States undertook that, if the Commonwealth agreed to co-op in the said scheme, legislation would be passed by the said States providing for the fixing of such prices for flour sold for hoi consumption in Australia as would provide for wheat growers 4 payable average price on all the wheat produced by them : whereas, in order to ensure a payable price in respect of the wheat sold for home consumption in Australia, it was represented at said conference that it would be necessary that a tax be imj upon flour sold for home consumption in Australia and that | proceeds of the tax be distributed among wheat growers in propo to the quantities of wheat respectively produced by them : whereas the Prime Minister on behalf of the Commonwealth a; that the Commonwealth would co-operate in the said scheme that any legislation necessary on the part of the Commonwealth would be submitted to the Parliament of the Commonwealth: And whereas legislation has been passed by the Parliaments of States providing for the fixing of prices for flour sold for home con sumption in Australia."

This scheme, as it was called, was implemented both by Commonwealth and the States. The Commonwealth enacted the Flour Tax Act 1938, No. 49, the Flour Taa (Stocks) Act 1938, No. 50, the Flour Tax (Imports and Exports) Act 1938, No. 51, a Wheat Tc Act 1938, No. 58, an assessment Act, the Flour Tax (Wheat Industry Assistance) Assessment Act 1938, No. 48, and the Wheat Industry Assistance Act 1938, No. 53. The States, other than Tas passed various Acts, all to the same effect, providing for the tion of flour and other products of wheat and for the application moneys paid to the State by the Commonwealth for assistance 0

the wheat growers. The Acts of the State of Tasmania were the H C. or A.

Wheat Products Prices Act 1938 (2 Geo. VI. No. 39) which provided for the regulation of the prices of flour and other products of wheat and the Flour Tax Relief Act 1938 (2 Geo. VI. No. 40) which provided for the relief of persons paying flour tax on flour for consumption n or imported into Tasmania. 4 The Flour Tax (Stocks) Act 1938 imposed a tax upon all flour in 'excess of one thousand pounds in weight held in stock on 5th December 1938 by any person not the manufacturer of that flour. The rate of tax, not in any case exceeding £7 10s. per ton of flour, such rate per ton of flour as the Minister in accordance with a mmendation by the committee (the Wheat Stabilization Advisory Committee constituted under the Wheat Industry Assistance Act 1938, No. 53), declares to be the amount by which the price per ton of flour based upon the price of wheat per bushel free on rails at 'Williamstown in the State of Victoria at the time of the reeommenda- tion of the committee was less than what in the opinion of the ommittee the price of flour would be if the price of wheat per bushel free on rails at Williamstown were five shillings and two pence. This form of imposing taxation was bad, so it was contended, ause the Parliament could not confer upon or delegate to any executive authority the function of determining the rate of tax. But this contention has many times been considered in this court and always rejected for reasons that are stated in the cases of Victorian Stevedoring and General Contracting Co. Ltd. and Meakes v. Dignan (1): See also Roche v. Kronheimer (2) and Crowe v. The Commonwealth (3). _ The preamble, already mentioned, was referred to in support of an argument to the effect that the flour taxes were imposed to provide financial assistance to the States and to ensure wheat growers a ayable price for wheat, but that the Parliament had not granted h financial assistance. The argument was based upon the Constitution, sec. 96, which enacts that Parliament may grant financial assistance to any State on such terms and conditions as he Parliament thinks fit. The Wheat Industry Assistance Act 1938,

(1) (1931) 46 C.L.R. 73. (2) (1921) 29 C.L.R. 329 (3) (1935) 54 C.L.R. 69.

it Ww Derury FEDERAL Comatis- SIONER OF TAXATION (N.S W.)

cna Deruty FEDERAL Commas- SIONER OF TaxaTIon (NS.W.)

No. 53, sec. 7 (2), provides for payments to each State by way of financial assistance out of a fund into which had been paid fre consolidated revenue the amounts collected by way of flour taxes of such amount, if any, as the Minister administering the Act (4 Interpretation Act 1901-1937, sec. 17) after advice from the Minister determined. Substantially this contention again as the proposition that Parliament cannot delegate its authority confer upon an executive authority the function of determining amount of assistance that a State requires. It is contrary to

v. The Commonwealth (1) : See clause 2 (3) of the agreement scheduled - to the Federal Aid Roads Act 1926, No. 46. I would add that I

Much broader ground, however, was relied upon in support of defence. It is said that the scheme of the Acts already mention involves taxation which discriminates between the States (Constitu- tion, sec. 51 (ii.)), bounties on the production or export of goods. which are not uniform throughout the Commonwealth (Constitution, sec. 51 (iii.) ) and preference to the State of Tasmania over the other' States contrary to sec. 99 of the Constitution : " The Commonwealth - shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State _ or any part thereof."

The provisions of the various Acts may be summarized. The tax Acts impose the taxation and the assessment Act provides for its assessment, collection and recovery. The Wheat Industry Assist- ance Act 1938, No. 53, provides for the grant of financial assistance to the States. A wheat industry stabilization fund is created into which is paid, out of the consolidated revenue fund, all moneys. collected under the assessment Act, sec. 5. Moneys to the credit. of the fund are applied in making grants of financial assistance to- the States (sec. 6). The whole amount paid into the fund, subject. to the deduction of certain payments, expenses and credits, is. applied in making payments to the States of such amounts respec-

ely that there shall be paid to each State in respect of that year 'the amount which bears to that total amount after the deduction has been made, the same proportion as the quantity of wheat produced in that State during the year bears to the total quantity of wheat produced in Australia during that year. Any amount so granted and paid to a State shall be paid to the State upon condition

to the quantity of wheat sold or delivered for sale by each wheat grower during the year in respect of which payment is made (sec. 6). Special accounts are kept in the fund, called " Wheat Industry Special Account " and " Wheat Tax Account," and the amounts at credit of those special accounts applied for purposes mentioned in accordance with the determination of the Minister administering the Act: See secs. 6 (3), (4), (5). (7) and (8) ; Acts Interpretation Act 1901-1937, sec. 17 - the Minister.

This court has decided that grants of financial assistance to the States may be made on such terms and conditions as the Parliament thinks fit and are therefore unaffected by sec. 99 or any other provision of the Constitution (Victoria v. The Commonwealth (1) ). So far, admittedly, the provisions of the Wheat Industry Assistance Act 1938, No. 53, do not contravene any provision in the Constitution. But the argument concentrated upon sec. 14 of that Act coupled with the Tasmanian legislation. The provisions of sec. 14 are : -

• "(1) In addition to any amount granted by way of financial assist- ance to the State of Tasmania in pursuance of section six or section seven of this Act, there shall, subject to this section, be granted out of the fund to that State, in each year by way of financial assistance, such amount as the Minister determines : Provided that the amount -peid to that State in any year shall not be greater than the sum (if any) by which the amount collected in that year under the Flour Tax (Wheat Industry Assistance) Assessment Act 1938 in respect of flour consumed in that State (whether as flour or as goods manufac- tured from flour) exceeds the total amount paid to that State in -Tespect of that year under section six and section seven of this Act : Provided further that no amount sball be payable under this section in respect of any year during which no moneys (other than moneys

that it is distributed to the wheat growers in that State in proportion W. R. Morax

H.C. or A. eollected as tax upon wheat exported from Australia or upon wh Ra produced and sold in Australia) were collected under the Flour Devry (Wheat Industry Assistance) Assessment Act 1938. (2) Payment FEDERAL é Comatts-

Taxeroe 28 the Minister determines. (3) For the purposes of this sectior

(N.S.W.) 'year' means a period of twelve months commencing on the v. : W. R. Moran of coming into operation of the loun Tax (Wheat Industry Assista

on any anniversary of that date." one Tasmanian F lotr A 'ax Relief Act 1938 - Geo. VI. No.

account called the "Flour Tax Relief Divi Account " wh int was credited with all moneys received by the State from the Comn wealth as a grant by way of financial assistance under the Industry Assistance Act 1938, No. 53, of the Commonwealth (sec. Any person who in Tasmania paid flour tax on flour for consumpti

flour for consumption in the State upon which flour tax had paid elsewhere than in the State might apply for payment to him - of an amount By way of relief in tespect of the flour tax so al

under the Act equal to the amount of flour tax paid less ten shi per ton.

operates, so it is argued, in a manner prohibited by the Constitution and avoids the whole of the flour taxes imposed by the Commo ne

sec. 14 is perfectly distinct and separable. It is not so interwo and intermixed with the other provisions of the Act that a radica or substantially different law is enacted if the provisions of sec. be inoperative. The grant to Tasmania under sec. 14 is not d with as part of an indivisible scheme but as a separate and indepen- dent subject matter. The legislation, if sec. 14 were inoperative, - leaves intact a body of provisions " consistent, workable and e tive," dealing with a subject matter within the power of the Common- f

wealth (Whybrow's Case (1); Olsen v. City of Camberwell (2) ), H.C. or A.

her still, the provisions of the Acts Interpretation Act 1901-1937, ei

sec. 15a, operate as a legislative declaration that the flour tax Acts Dsrury

shall not fail even though the provision in sec. 14 be invalid: ee "Bvery Act . . . shall be read and construed subject to the jf ovrnor

Constitution, and so as not to exceed the legislative power of the arse) Commonwealth, to the intent that where any enactment thereof W. R. Morax would, but for this section, have been construed as in excess of that ail = power, it shall nevertheless be a valid enactment to the extent to *"**'> which it is not in excess of that power " (Newcastle and Hunter River

Steamship Co. Ltd. v. Attorney-General for the Commonwealth (3) ; Australian Railways Union v. Victorian Railways Commissioners (4) p -

. Carter v. Carter Coal Co. (5). The same answer may be given

o an argument based on secs. 6 (7) and 10 that bounties have been

anted by the Parliament that are not uniform throughout the Commonwealth.

Consequently the defence in this case fails. In this view it is not

ally necessary to decide whether the provisions of sec. 14,

coupled with the Tasmanian Act, operate in contravention of the Constitution. One cannot but be impressed, as Higgins J. said in Attorney-General for New South Wales v. Brewery Employees Union

New South Wales (6), " with the wisdom of the practice, so well

blished in the Supreme Court of the United States, never to

ide against an Act as unconstitutional except 'in the last resort

and as a necessity in the determination of real, earnest and vital controversy between individuals': Chicago and Grand Trunk Rail-

way Co. vy. Wellmann (7). Nothing would tend to detract from

the influence and the usefulness of this court more than the appearance of an eagerness to sit in judgment on Acts of parliament,

nd to stamp the Constitution with the impress which we wish it.

obear. It is only when we cannot do justice, in an action properly

brought, without deciding as to the validity of the Act, that we are

(1) (1910) 11 C.L.R. 1, at p. 36. (5) (1936) 298 U.S. 238, at pp. 312,

2. (1926) V.L.R. 58, at p. 68; 47 313, 321, 322, 334, 335 ; 80 Law. ALT. 116, at p. 120. Ed. 1160, at pp. 1189, 1190,

• (4) (1930) 44 C.L.R. 319, at p. 386. (6) (1908) 6 C.L.R. 469, at p. 590.

(7) (1892) 143 U.S. 339, at p. 345; 36 Law. Ed. 176, at p. 179.

H.C. or A. entitled to take out this last weapon from our armoury " a Carter v. Carter Coal Co. (1). Dervty I shall, however, do no harm in this particular case in expre FEDERAL ti Commis. my opinion that the Commonwealth Acts do not contravene a Tescuee Provision of the Constitution. The court cannot concern (Ws al ) with the motives of the Parliaments. All it can rightly do is W.R. Monax inquire whether the means devised by the Parliaments in the execu Pry, Lrv. g fie ajven ; tion of their powers are prohibited by the Constitution. It is on the face of the various Acts already mentioned and is expli recited in the preamble to the Wheat Industry Assistance Act 193 No. 53, that the Commonwealth and the States were co-operatin g in a scheme to ensure wheat growers a payable price for wheat The legislative bodies of the Commonwealth and the States each entitled to use to the full the powers vested in them for t purpose of carrying out the scheme. Co-operation on the part of the Commonwealth and the States may well achieve objects 1) : neither alone could achieve ; that is often the end and the advanta; of co-operation. The court can and ought to do no more inquire whether anything has been done that is beyond power is forbidden by the Constitution. The main feature of the scheme to ensure wheat growers a payable price for their wheat has not been attacked. It is contended, how- ever, that the provisions of secs. 6 and 10 of the Wheat Industry Assistance Act 1938, No. 53, involve a bounty on the production or export of goods that is not uniform throughout the Commonwealth. The argument, if sound, would not, in my opinion, destroy the taxi Acts for reasons already given. But sec. 6 grants no bounties : grants financial assistance to the States upon condition that the - amount granted is distributed to wheat growers in manner provided by the section. Even if the same result might have been achie ; by the grant of bounties, still the Parliament did not resort to method but to another authorized and not forbidden by the Con- stitution. The lack of substance in the contention is accentuate when it was suggested that uniformity is lacking in the grant of so-called bounties because the Parliament might under sec. 10° suspend financial assistance to any State in certain events. But -

(1) (1936) 298 U.S., a p. 325; 80 Law. Ed., at p. 1196.

uch a provision is not wanting in uniformity: it applies a uniform H- ©. or A. tule to the cases stated in the section though the cases may not eS

occur in each State at the same time: Cf. Colonial Sugar Refining Durvry FEpERab

'o. Ltd. v. Irving (1). Cea _ The main objection, however, is based upon the provisions of sec. 14 ON Oe of the Wheat Industry Assistance Act 1938, No. These provisions, ee) at all events, it is said, involve a plain discrimination in taxation W. R. Moran between the States ora manipulation of the revenue of the Common- gaia

wealth so as to give a preference to Tasmania over the other States. cv

But the taxation Acts do not discriminate in any way between the 'tates. The tax is imposed upon every person within the categories mentioned in the Acts in whatever State he may be: tax Acts (supra); assessment Act (supra), secs. 10 to 14 both inclusive. her, sec. 14 is, on its face, a grant by way of financial assistance to Tasmania. It is true that the amount of the grant depends upon tax collected upon flour consumed in Tasmania and is not eater than the sum, if any, by which the amount of tax collected

eeds the total amount of grants by way of financial assistance aid to the State under other sections of the Act. But the State is to deal with the grant free from any control of the Common- ealth. The Commonwealth does not by any law or regulations of evenue give any preference to the State of Tasmania that is for- idden by the Constitution for, as already observed, grants of neial assistance to a State are unaffected by sec. 99 or any other ovision of the Constitution. A grant of financial assistance of State necessarily depends upon the financial position of the State at the time of the grant. The Constitution in sec. 96 explicitly cts that financial assistance may be granted to any State, which es plain that a grant under this section to one or more States and not to others is no infringement of the provisions of sec. 99 of e Constitution.

A grant of financial assistance to a State under sec. 96 is not, ther efore, a law or regulation of trade, commerce or revenue which gives preference to one State over another State. Such a grant is uuthorized and not forbidden by the Constitution.

H.C.or A. Tt is clear enough though that an end contemplated by the Whea

83% Industry Assistance Act 1938, No. 53, sec. 14, and the Flour Ta Devuty Relief Act of Tasmania was relief from flour tax in respect of cane consumed in or imported into Tasmania by payments of ami Tassnoe determined in the manner required by the Act. The Commonwi (NS.W.) Jegislation on its face purports to levy flour taxes and by sec. 141 4 x grant financial assistance to Tasmania, but it is said that the object or purpose of the legislation is the giving of a preference Tasmania. The history of the legislation, its operation, and

resolutions of a conference recited in the preamble already mentii

were legitimately referred to in support of this contention, but good deal of inadmissible evidence was also relied upon such communications between Ministers of State and other executi officers and speeches made at conferences by the Prime Minister the Commonwealth and ministers of the States. I do not find necessary to discuss the evidence in detail, for I think all the mati relevant to the contention appears upon the face of the legislatio itself, particularly in the preamble to the Wheat Industry Assisti Act 1938, No. 53. Everything is plainly and fairly stated : noth is cloaked and hidden. But, as already stated, the end was achi lawfully by methods within the constitutional powers of the | lative bodies and by means that are not anywhere forbidden by Constitution. Several cases, however, were referred to in support of the conten- tion, but I shall confine myself to three : Attorney-General for All v. Attorney-General for Canada (1), United States v. Butler (2) a R. v. Barger (3). The Alberta Case (4) was a decision under a reference to the Supra Court of Canada pursuant to the Supreme Court Act. The Legislative | Assembly of the Province of Alberta had passed a Bill imposing on every corporation (other than the Bank of Canada) incorporated for the purpose of doing banking business in the Province an annu tax, in addition to any tax payable under any other Act, on capil and on reserve fund and undivided profits. It was sought to ju the Bill under sec. 92 (2) of the British North America Act as

(1) (1939) A.C. 117. (3) (1908) 6 C.LR. 41, (2) (1935) 297 U.S.1; 80 Law. Ed. 477. (4) (1939) A.C. 117.

revenue for provincial purposes." The Judicial Committee examined the provisions of the Bill, the legislative history of Alberta leading up to the Bill in question, its operation and effect and its object or purpose, and the conclusion was reached that instead of being in any true sense taxation in order to the raising of revenue for Provin-

the operation within the Province of banking institutions which "had been incorporated and given the necessary power to conduct _ their business by the Dominion Parliament pursuant to sec. 91 (15) and (16) of the British North America Act. But the constitutional power of the Commonwealth in respect of taxation is general in its terms: "Taxation: but so as not to discriminate between States _ or parts of States " (sec. 51 (ii.) ). And the aim and purpose of the _ Australian legislation is to raise money for the purpose of assisting : wheat growers and not to trespass upon any authority of the States. United States v. Butler (1) dealt with an Act of Congress _ which enacted a processing tax upon the first domestic processing of commodities. The Act on its face was passed to increase the _ price of certain farm products for the farmer by decreasing the ; quantities produced: the decrease was to be attained by making _ payments of money to farmers who under agreements with the government reduced their acreage and crops. It was decided, three _ justices dissenting, that the Act was part of a plan to invade the reserved tights of the State (2) and to trespass upon their authority. ; But the Commonwealth legislation invades no rights reserved by the Constitution to the States and in no wise trespasses upon their authority: See Engineers' Case (3).

The case of R. v. Barger (4) in this court held, against the dissent of two justices, that an Act purporting to impose duties of excise was in truth an Act to regulate the conditions of manufacture of agricultural implements and therefore not an exercise of the power of taxation conferred by the Constitution. The terms of the Act itself led to this conclusion, but are not relevant to the legislation

(2) (1935) 297 U.S., at p. 68 ; 80 Law. Ed., at p. 489. (3) (1920) 28 C.L.R. 1.

"direct taxation within the province in order to the raising of a H.C. or A.

cial purposes the Bill was merely part of a legislative plan to prevent W. R. 'Morax

H.C. oF A. now in question. All the members of the court, however, concur aes in the view that the question was one of power, that the mo

Derury which actuated the legislature, the end desired, and the indi FEDERAL

Comms. effect. of the Act were all equally irrelevant. And, in my opinion SIONER OF s

the legislation, in this case, is within power for the reasons already

Evarr J. This action raises a question of the greatest cons tional importance. Before any decision was given the action removed to this court from a New South Wales District Co where the defendant's sole defence to actions brought for the recove of flour tax under Commonwealth Acts Nos. 48 and 50 of 1938 that such Acts were ultra vires the Commonwealth Parliame Before this court, several minor grounds were relied upon to establis the invalidity of the Commonwealth Acts. But the outstand point is whether Commonwealth Acts Nos. 48 to 53 of 1938 inclusive, which include a scheme of taxing flour, infringe the prohibition contained in sec. 51 (ii.) of the Commonwealth Constitution to the effect that the Commonwealth power of taxation must be exercised "so as not to discriminate between States or parts of States."

This point does not raise any question as to the limits inter se the constitutional powers of the Commonwealth and any of the States: See James v. Cowan (1). The issue is simply whether the - Commonwealth Parliament's undisputed power of taxation has been - used inconsistently with an overriding constitutional mandate.

In my opinion there has been a very thinly disguised, almost patent, breach of the provision against discrimination; and the especial significance of the present: case lies in its result, which prac- tically nullifies a great constitutional safeguard inserted to prevent differential treatment of Commonwealth taxpayers solely by reference - to their connection or relationship with a particular State. i

In the present case, moreover, the discrimination exercised by the Commonwealth in favour of the State of Tasmania bears little rese blance to the comparatively minor type of differentiation illustrate by Cameron's Case (2), where the Commonwealth statutory rule was

(1) (1932) A.C., at p. 560; 47 C.L.R., at pp. 397, 398. (2) (1923) 32 C.L.R. 68.

seeking to lay down a fair average value of stock but offended because H. ©. or A. that value was varied in accordance with the State in which the Ree stock were found. But here, taxpayers associated with the favoured Dzeury State obtain the tremendous advantage of a remission or exemption as

• of more than ninety per cent of a very heavy levy which is exacted pee without any remission or exemption in the case of taxpayers similarly - (N.S.W.)

_ associated with the other five States of the Australian Common- W. R. Moray eeaith, Pry. Lrv. Under the Commonwealth Constitution, taxing schemes are often spread over a number of Acts. For one thing, except in the case _of duties of customs or of excise, laws imposing taxation must deal with one subject of taxation only (The Constitution, sec. 55). The draftsman is very apt to separate different aspects of what is or

may be regarded as one subject of taxation. Again, sec. 53 of the

Constitution takes away from the Senate the power of originating or amending bills imposing taxation; but sec. 55 intervenes to prevent the device of "tacking" by the House of Representatives by requiring that laws imposing taxation shall deal only with the _ imposition of taxation. For very many years this requirement has been observed by the draftsman with a literalness which at times seems to have been almost pedantic. The established practice is to pass one Act which imposes a rate of taxation and another tax Act, called the "assessment" Act, which defines the subject matter of the tax, provides for its collection and recovery, for exemptions, for refunds in appropriate cases and for other necessary incidents in any taxation scheme. The practice has been followed in the

• Commonwealth's present taxing scheme.

In the light of the established practice, the Commonwealth legislature, if it was minded to establish a taxation system which _ discriminated between States, and to do so by the most direct method, _ would include in the assessment Act a provision exempting either wholly or partially from the operation of the tax imposed by the tates Act either taxpayers or goods solely because of their association with the States which were to be favoured. Thus, in a system of income taxation, the assessment Act would provide (a) that those entitled to exemption should include, e.g., all persons who were resident in the State of New South Wales, or (b) that the " income "

H.C. or A. subject to tax should not include income earned in such State,

bec (c) that from the "income" of every taxpayer there should b

Derury deducted expenditure incurred in earning it, provided it was incurre

Teseno. Similarly, in a system of taxing the production of a commodity,

Ww. the assessment Act might provide that taxpayers should be entitled Ls oy to exemption from payment of a stated percentage of the tax

• • ' condition that the commodity should be manufactured in Victoria,

BvattJ- or on condition that the commodity should be consumed in Victoria,

or on condition that the raw materials used in its manufacture

Tn all such cases of discrimination contrary to sec. 51 (ii), the -

rates Act would not, of itself, evidence the fact of discrimination.

It would, presumably, merely declare that taxation at the rate it uf

fixes shall be imposed in accordance with the provisions and con- -

ditions specified in the assessment Act. Incidentally, the examples

given above show that sec. 51 (ii.) is infringed wherever a condition -

or provision or exemption or relief from taxation fails to treat all

States of the Commonwealth alike. It is no answer to say that ite

a stated condition of exemption from income tax was residence in

Victoria, every taxpayer in Australia was at liberty to satisfy the -

condition by residing in Victoria. By establishing such a condition

of exemption, the taxing scheme infringes sec. 51 (ii.) (per Isaacs J.

in Cameron's Case (1)); and, unless it was clear that in case of

challenge in the courts, the exemption was to be regarded as obliter-_

ated (and the proceeds from the tax thereby increased), the tax, as

well as the exemption from tax, would be void, for the forbidden -

discrimination arises from their conjoint operation. 4

The leading case on sec. 51 (ii.) of the Constitution is R. v. Barger -

(2). There the Commonwealth Excise Tariff 1906 was held to _

be invalid upon four distinct grounds, three of which were specified

by the majority of the court (3) and are irrelevant to the present @

question. But the fourth ground of attack was based upon sec. -

51 (ii.) and it was also sustained. All that the Eacise Tariff

did was to impose duties of excise upon specified goods at specified _

(1) (1923) 32 C.LR., at p. 76. (2) (1908) 6 C.L.R. 41. (3) (1908) 6 C.LR., at p. 78,

tates, and to provide that the Act should not apply to goods manufac- tured by any person in any part of the Commonwealth under con- ditions as to remuneration of labour which were (by any one of four prescribed methods) deemed fair and reasonable. It was possible that, as a result of the so-called "

exemption," goods of the same class would be excisable in some parts of the Commonwealth but not in others. But it is very difficult to appre- _ ciate the court's finding that because of such possibility the Act discriminated between States or parts of States because there was

• differentiation in the taxing scheme by reference to the criterion of locality. The majority so held, but, with great respect, I think erroneously. This particular ruling in R. v. Barger (1) has never been formally overruled, but the reasoning of the judges in cases like Cameron v. Deputy Federal Commissioner of Taxation (2) tells _ against it. Of course, the first ground of the decision - that the Excise Tariff was in substance not an attempt to raise revenue, but to penalize unfair labour conditions and was therefore outside the specified heads of Commonwealth legislative power - was quite _ independent of the argument based on sec. 51 (ii.).

In Cameron's Case (3), Higgins J. said of Barger's Case (1) : - '* We

were in the minority in that case as to the main decision; but I cannot find that as to our general understanding of discrimination _ between States, as to our major premiss, we were in conflict with the majority of the court. Unless and until overruled on the subject, I adhere to what I then said". Tn these circumstances it is convenient, because most favourable to the Commonwealth, to accept the judgment of Isaacs and Higgins JJ. in Barger's Case (1) as correctly stating the principle to be applied in the interpretation of sec. 51 (ii.). Isaacs J. said :- -

" The pervading idea is the preference of locality merely because it is locality, and because it is a particular part of a particular State. It does not include a differentiation based on other considerations, which are dependent on natural or business circumstances, and may operate with more or less force in different localities; and there is nothing, in my opinion, to prevent the Australian

Parliament, charged with the welfare of the people as a whole, from doing what every State in the Commonwealth has power to do for its own citizens, that

(1) (1908) 6 C.L.R. 41. (2) (1928) 32 C.L.R. 68. (3) (1923) 32 C.L.R., at pp. 78, 79.

is to say, from basing its taxation measures on considerations of fairness justice, always observing the constitutional injunction not to prefer States or parts of States" (1).

"the area is marked out by the circumstances, not the cireumstan by the area " (2).

In his judgment, Higgins J. said : - '* There is not one rate of excise for Queensland and another for West Australia, nor is there one set conditions of exemption for Tasmania and another for Victoria. Each - manufacturer is to be treated on his own merits; and all the four - bases for exemption are applicable to all manufacturers, wherever - they are found in Australia " (3).

In Cameron's Case (4), Isaacs J. applied these principles. He said ae "Stock in Queensland and stock in New South Wales are, by reason solely

of their State situation, 'treated differently,' by the mere fact that different standards are applied to them respectively. It does not matter whether those legal standards are arbitrary or measured, whether dictated by a desire to benefit or to injure, the simple fact is they are 'different,' and those different legal standards being applied simply because the subject of taxation finds itself in one State or the other there arises the discrimination by law between States which is forbidden by the Constitution ".

It is clear from these principles laid down in Barger's Case (5) and applied in Cameron's Case (6) that, if the Commonwealth Parliament - granted an exemption from tax to all manufacturers who sold the excisable goods in (say) New South Wales, what Isaacs J. calls "the constitutional injunction" of sec. 51 (ii.) would have been - disobeyed. Equally in case of income taxation, if an exemption had been granted to all Australians who were resident in New South Wales. In neither case would it have been an answer that, in theory, - every manufacturer could have obtained the exemption by restricting his sales to New South Wales, and every income taxpayer resident - elsewhere could have changed his residence to that State. In neither case, to use the language of Isaacs J. is the " differentiation . . . dependent on natural or business circumstances " (1); on i the contrary, it is entirely dependent on the factor of locality because it is locality. In neither case do the particular circumstances

(1) (1908) 6 C.L.R., at p. 108. (4) (1923) 32 C.L.R., at pp. 76, 77.

(2) (1908) 6 C.L.R., at p. 110. (5) (1908) 6 C.L.R. 41. (3) (1908) 6 C.L.R., at p. 131. (6) (1923) 32 C.L.R. 68.

govern or determine the scope of immunity or exemption : immunity

_ or exemption results solely from a consideration of State boundaries.

It is hardly likely that this court will ever be called upon to give its judgment upon instances so plain as those illustrated ; where

_ the exemption from tax is granted upon a State basis, and where

• the tax is not collected from the exempted persons or upon the _ exempted goods.

A second type of discrimination arises where the tax is imposed

without discrimination, but provision is made in the assessment Act

for refunding the tax or a portion thereof to those taxpayers who

• (to pursue similar illustrations) are resident in New South Wales,

or to those taxpayers who manufacture the excisable commodity in

_ Victoria or to those taxpayers who sell the commodity in South

Australia. In all such cases, the taxing scheme constituted by the tates Act and the assessment Act would just as clearly infringe the

_ injunction of sec. 51 (ii.). True, the Commonwealth would collect

from all taxpayers alike ; but it would refund the tax solely because

Inall such cases, moreover, the fact that the provision for refunding would require an appropriation of Commonwealth funds would not be material. Considered by itself, a provision authorizing the

expenditure of money would not be a provision with respect to

taxation. Considered as part of the taxing scheme, provisions authorizing refunds of tax are provisions in relation to taxation,

Pp and are always included in the tax assessment Act.

Tt needs little imagination to visualize that in all these cases, the representatives elected to the Federal Parliament from the favoured

_ State would view with equanimity, if not with enthusiasm, such a

differentiation in the incidence and burden of Commonwealth taxation ; but that is the very possibility which sec. 51 (ii.) was designed to avert; for by various combinations of State interests, some States could be greatly advantaged, and other States seriously disadvantaged by such taxing schemes. In such cases at least, the

aphorism of Chief Justice Marshall would apply. The power to

tax would be the power to destroy. I shall now turn to the legislation of the Commonwealth

_ which is said to infringe sec. 51 (ii.). The six Commonwealth Acts

Ww Derury FEDERAL Commas- SIONER OF TAXATION (N.S.W.)

here in question (Acts Nos. 48 to 53 inclusive) all became law the same day (2nd December, 1938). On the same day, a Tasman Act (No. 40 of 1938) also became law. It will appear that in seven Acts there was a concurrence, not only of time, but of subj

Dealing first with the Commonwealth Acts, we find that three of them (Nos. 49 to 51) impose taxation upon flour, No. 49 upon flou manufactured in Australia, No. 50 upon flour held in stock on December 5th 1938, and No. 51 upon flour imported into Australia, - Portion of Act No. 51 and the whole of Act No. 52 were part of the same legislative scheme, and imposed a tax upon wheat exported - from Australia and wheat grown in Australia and sold to a wheat merchant. But these taxes upon wheat were to operate only in - the event of a considerable increase in the price of wheat. That event has not yet happened ; the main object of the scheme having been to increase to a " stabilized " level the effective price of wheat - in Australia. :

Further, the Tasmanian Act, No. 40 of 1938, relates only to persons who have paid the flour tax imposed by the Commonwealth Acts Nos. 49 to 51 inclusive.

Each of the Commonwealth Acts imposing taxation upon flour incorporates most of the provisions of the Commonwealth Act No. 48, i.e., the Flour Tax (Wheat Industry Assistance) Assessment - Act, which provides for the collection and recovery of the various taxes, for the administration of the taxing scheme, for certain exemptions (such as flour for use in the Northern Territory) and for refunds of tax, e.g., in relation to flour upon which tax has been : paid but which subsequently becomes exempt from tax because - (say) consumed in the Northern Territory: See, e.g., Act No. 48, secs. 14 (1) (d) and sec. 30.

The crucial point of the present case is conveniently illustrated by this exemption from flour tax and the creation of the ancillary - right to refund in the case of flour consumed in the Northern Territory. That Territory is not a State and is therefore outside the prohibition of sec. 51 (ii.). But if such a provision had been applied in favour of the State of Tasmania or if the Northern Territory were a State, -

then it is elementary that a discrimination contrary to sec. 51 (ii.) would have been enacted by the Commonwealth.

Tf such an immunity or exemption was part of the Common- Derury wealth's scheme of legislation, it could have been expressly provided 'commna. either in the taxing Act, or in the assessment Act, that in case of Toxin or

flour consumed in the State of Tasmania : - (a) the flour tax was to (N.8.W.)

be levied at the rate of only (say) 8.5 per cent of the rate levied upon W. R. rca

flour consumed in the other States of Australia (8.5 per cent is taken pape: because where the flour tax is levied at the rate of £5 17s. 6d. per ton, flour for consumption in Tasmania is in substance levied at the rate of only ten shillings per ton); or (b) the taxpayer was to

be granted a formal exemption of 91.5 per cent of the tax otherwise

payable ; or (c) the taxpayer, though not granted a formal exemption as in (b), was to become entitled to a refund of 91.5 per cent of the tax already paid by him, the Commonwealth providing the necessary funds from the proceeds of the flour tax and payment being made

to the taxpayer by some person designated by the Commonwealth of Australia.

If any one of the three courses mentioned had been adopted, the fact of unconstitutional discrimination would have been plainly evident. But a parliamentary draftsman would naturally shrink from so open a defiance of constitutional requirements. Therefore precisely the same result was sought to be achieved by a slight alteration in the modus operandi. Instead of adopting any one of the three methods above specified, the draftsman, having several convenient precedents at hand in legislation passed in 1934 and 1935, decided upon a slight variation of method (c) above specified.

The Commonwealth was to hand over to another authority _ approximately 91.5 per cent of the proceeds of the tax collected by the Commonwealth upon flour consumed in Tasmania, and such authority was to repay to each taxpayer affected 91.5 per cent of the tax already paid by him upon flour consumed in Tasmania. Thasmuch as this rebate or remission or exemption would operate for the benefit of Tasmanian consumers, it was decided to select the State of Tasmania itself as the proper and convenient " authority" for the purpose of acting as the Commonwealth's conduit pipe for 'the refund of Commonwealth tax. Of course, the Commonwealth

H.C. or A. Deputy Commissioner of Taxation in Tasmania or a private per 1939.

Ww Derury _ better to follow the less direct but very convenient method a a devised by those who were the Commonwealth's legal advisers the years 1934 and 1935.

During those years, on three separate occasions, legislation

"was intended to secure, and did secure, for Tasmania special tr Evatt J- ment in relation to the flour tax then imposed and collected unde the authority of the Commonwealth Parliament. Those o

(L.) On 12th December 1933 the Commonwealth Parlia enacted No. 42 of 1933. The Act provided for assistance to whe growers. But sec. 12 required a special grant to Tasmania " each month during which a tax is, under any law of the Comm 1 wealth, imposed upon flour."

On 22nd December 1933 the State of Tasmania enacted No. | of 1933. called the Flour Tax Relief Act. It required the payme into a special account of the moneys received by way of "s]

2 (3) directed the treasurer to pay out of the special account the amount of the flour tax paid in respect of flour consumed in T: mania; the money was payable either to the taxpayer who paid. the Federal tax in Tasmania, or to the importer who imported flour after tax had been paid on it elsewhere in Australia.

(II.) A year later, on 17th December 1934, the Commonw Parliament passed Act No. 59 of 1934, which by sec. 9 granted Tasmania a certain sum for each month during which the Co wealth tax on flour was being collected. Then, on 4th Jan 1935, the Tasmanian Parliament passed Act No. 89 of 1934. Ag

wealth grant was to be swept. The procedure for obtaining re of the tax or " relief in respect of the flour tax " was slightly alt A certificate had to be obtained, and there was no provision that whole of the tax was to be refunded. : (IIL.) A year later still. on 9th December 1935, the Comm wealth Parliament passed Act No. 73 of 1935. On this o

the Act was called Tasmania Grant (Flour Tax) Act, a name which

sufficiently evidenced the purpose of the Commonwealth differentia-

tion in favour of taxpayers wherever the flour came to be consumed in Tasmania. Otherwise, the Act practically repeated the terms of the relevant sections of the two previous Acts.

_ The Tasmanian Act, No. 71 of 1935, merely amended and continued the Act No. 89 of 1934.

_ By the end of 1935, therefore, the procedure was becoming well settled. It was desired to give Commonwealth taxpayers exemption

} from flour tax if the flour was to go into use in Tasmania. The Commonwealth would collect the tax in all the States including Tasmania. Then it would provide a special grant to Tasmania for "flour tax purposes; and a refund or a rebate would be paid by 'Tasmanian officials to the Commonwealth taxpayers. The result ; was that Tasmania received no subvention towards ordinary revenue _ purposes, the Commonwealth lost the benefit of the tax collected in respect of flour consumed in Tasmania, and those who were called _ upon to pay such tax received a rebate or refund amounting to all or a very large portion of the tax. In substance and reality, the Commonwealth saw to it that a special section of its taxpayers ' were granted an exemption, that exemption proceeding solely by reference to the benefiting of Tasmanian taxpayers and Tasmanian consumers. The Tasmanian legal apparatus operated, as it was intended to operate, merely as the means selected for returning to Commonwealth taxpayers moneys which Commonwealth officers 7 had already collected from such taxpayers. The evidence shows that this scheme of differential treatment _ Was operated ina very simple manner. On every day, the Tasmanian

officers received from the Commonwealth taxation department in 'Tasmania returns showing the name of the taxpayer and the amount of tax paid by him. At first, the Tasmanian officials paid to each person entitled every penny of the tax which had been paid to the Commonwealth. Later, owing to a failure to estimate with precision, they paid at the rate of £2 4s. 6d. per ton out of the total tax of £2 12s. 6d. per ton. The Tasmanian officials notified the Common- wealth taxpayers through the press and otherwise that the refunds ere to be made: further, upon payment over the counter, the

paid, that they should apply for refunds to the Tasmanian offici This evidence shows the general nature of the scheme. Norm payments by taxpayers to the Commonwealth taxation autho cannot be revealed to other State officials without serious inft ment of the secrecy required by the Commonwealth taxation On this occasion, there was no occasion for secrecy. The Commo wealth officials still collected the moneys, but they knew intimated that refunds would be made on application to anoth office round the corner. The Commonwealth's device was, to turn the phrase, that of sawler pour mieux reculer. In order to see how closely the methods of 1934-1935 were followe in the present scheme, I now turn to the enactment of the Comn

The Commonwealth Act is No. 53 of 1938, called the Whe Industry Assistance Act. Its recitals are of great importance, I postpone consideration of them for the moment. It estab a fund into which all moneys collected under the assessment are to be paid. In the contingency (which at the commencement of the scheme was deemed very unlikely) of the price of w exceeding the " stabilized price," so that moneys would be received from the tax upon wheat grown in Australia, a wheat tax account was to become a reality, sec. 6 (4). There is also a " wheat industry special account," established for a purpose which is not here material.

Omitting these two separable accounts, the principal fund, called the wheat industry stabilization fund, is devoted to the making of payments to the States for distribution to the wheat growers thei in proportion to the production and sale of wheat in the respective States. Of course, an essential feature of the stabilization schem is to tax flour at the point of manufacture so that the burden of

the wheat producer who is producing on an unprofitable b There is no constitutional objection to the Commonwealth's ta one class (the consumer) for the benefit of another (the producer) indeed, uniform bounties on production or export are placed wi

the Commonwealth's exclusive jurisdiction by sec. 51 (iii.) and sec. 90. But the Commonwealth's taxing power must not be exercised in conflict with sec. 51 (ii.).

Before the wheat: producers (through the States) become entitled to any payment under secs. 6 (6) and (7) of the Act, the fund is first charged with (a) refunds of tax under the assessment Act and the administrative expenses of the Act, and (6) the payments to Tasmania provided for under sec. 14 of this Act. It is curious, and perhaps significant, that in this way the Commonwealth grouped with _tefunds of tax (payable, e.g., in relation to flour consumed in the Northern Territory which is exempt from tax) the special payments "under sec. 14, the effect of which is to provide for refunds of tax in relation to flour consumed in Tasmania.

Sec. 14 provides that in addition to the amounts payable to 'Tasmania for the benefit of its wheat growers (on the same footing as all other States and all Australian wheat growers) a special yearly grant is to be paid to Tasmania, the amount to be determined by the Commonwealth Minister. It is also provided that : - (1) This annual amount is not to be greater than the amount by which the tax collected in respect of flour consumed in Tasmania exceeds the payments Tasmania may receive either as bounty for her wheat

growers under sec. 6 (7) or for distressed growers under sec. 7; 2) If no flour tax is collected by the Commonwealth, the special grant under sec. 14 ceases to be payable.

It is to be noticed that (1) no State other than Tasmania teceives money under sec. 14 ; (2) the moneys receivable by Tasmania, under secs. 6 and 7 of the Wheat Industry Assistance Act would be ery small compared with the amount of flour tax collected in respect of Tasmanian consumption of flour which is subject to tax. On 19th January 1939 the Federal treasurer estimated that the two

nnual sums amounting to £6,205 and £124,400 respectively. It lows that the sec. 14 grant to Tasmania is, and probably will

remain, about nineteen times the moneys payable to Tasmania under secs. 6 and 7.

Tt has been suggested that, in respect of wheat production, Tasmania stands apart from the other five States, and that the ssion of flour tax is to be explained on the theory that if one

H.C. or A. adds the large benefit to Tasmania of the flour tax grant (sec. bear to the very small benefit of the bounties to Tasmanian wheat groy Derury (secs. 6 and 7), one will find that, speaking very broadly, Tasm es may be said to receive a corresponding benefit to the other Tesanoe 2 think that the comments to be made are : - (1) Sec. 51 (ii.) cam (N.S.W.) be infringed because the State in favour of which taxation diseri W.R. Monax tion is shown gets little or no benefit from the funds provided ag tical the taxation scheme; (2) while Tasmania is not a great wi producing State, neither is Queensland. The area of Queensland approximately twenty-five times as great as that of Tasmania, and

its population is less than five times as great. The area sown

a case for differential treatment could be made as much in favom of Queensland as of Tasmania. In truth, there is nothing in Commonwealth scheme of distributing moneys derived from flour tax which ensures any equality of the States even in economic result; to say nothing of the extraordinary theory that because (say) New South Wales is a great wheat-producing State, the ; consuming population of that State should pay more for their flour and their bread than the small wheat-producing States. : On 2nd December 1938 the Tasmanian Flour Tax Relief Act was passed. It recited that the State was to receive grants during period in respect of which a tax is imposed upon flour. It provi that the Secretary for Agriculture "may" certify to payment flour tax, and that the Secretary was to determine the amount of "relief " payable to any Commonwealth taxpayer in respect of flo consumed in Tasmania. The operation of sec. 14 of the Wheat Industry Assistance Act

1938 is substantially the same as under the previous legi It is to be noted, however : - (1) While sec. 14 in terms does | more than fix a maximum grant, the Minister has in fact g up to the maximum, though the actual figure has to be estimat and adjusted from time to time and it varies in accordance the rate of flour tax, which is also adjusted from time to time accordance with the prevailing price of wheat ; (2) under sec. 10 b)

of the Commonwealth Act, the Commonwealth has reserved power 'to suspend payments where the consumers are not adequately pro- tected. Therefore, if Tasmania failed to use the sec. 14 grant for he benefit of taxpayers and indirectly of Tasmanian consumers, the lommonwealth could suspend the grant altogether.

_ Under the Tasmanian Flour Tax Relief Act 1938, the Secretary for Agriculture has determined that for the present the amount of 'the refund to be made to taxpayers will be the full amount of the flour tax paid to the Commonwealth less ten shillings per ton on the taxable amount of flour. This determination was made " mentally," but it is to endure for nine months. There have been fluctuations 'in the rate of the flour tax, but the refund has in all cases been the amount of the tax paid, less ten shillings per ton. The ten shillings per ton was taken off because Tasmanian officials estimated that 'the sec. 14 grant would fall short of the total tax collected in respect of Tasmanian consumption by an amount corresponding to such deduction. However, when the flour tax was £5 17s. 6d. per ton, the taxpayer received back £5 7s. 6d., i.e., approximately ninety-one per cent of the flour tax paid. The ninety-one per cent is subject to review, and may increase: in substance, the Tasmanian officials consider themselves, and correctly so, chosen instruments for repay- ing so much of the tax on flour consumed in Tasmania as can be repaid from the moneys granted by the Commonwealth under sec. i.

The main contention of the Commonwealth is that Tasmania's decision to use the sec. 14 grant for flour tax relief had nothing whatever to do with the Commonwealth's scheme of taxation. But this is contradicted by the fact that not only was the Tasmanian egislation put into force simultaneously with that of the Common- wealth, the passing of each being in fact, if not in form, contingent ipon the passing of the other; but every executive determination of the Commonwealth Minister under sec. 14 has been come to with

e moneys granted to Tasmania. It is plain that the Minister acted within the scope of the statutory power conferred upon him; and

W. R. Monax mittee delivered by Lord Macmillan in Attorney-General for Bi Pry. 1. Columbia v. McDonald Murphy Lumber Co. Ltd, : -

" Now, in the present case, the real nature of the tax in question is transp: obvious. While the statute sets out to impose a tax on all timber cut

to an illusory amount in the case of timber used in the Province, leaving it operate to its full effect only on timber exported. 'The best evidence that th tax was intended to be to all intents and purposes an export tax is afforded | the fact that since 1914 the minute rebated tax on timber and used within the - Province has not been collected. Indeed, the tax has come to be known as "the timber tax on export,' and is so described in the final report of the Royal Commission of inquiry on Timber and Forestry, 1909-1910, extracts from which are among the exhibits in the case" (2).

The above passage illustrates the principle that it is necessary t consider the existence and extent of a rebate of a tax in order t¢ determine the real nature of the tax and whether it operates without discrimination. ;

But the Commonwealth's intention to discriminate in favour | Tasmania is even more clearly revealed by the history of the le lative scheme.

The defendant maintains that, from the first, the legislat scheme to which the Commonwealth adhered included as an feature thereof a condition that, in relation to flour to be consun in Tasmania, an exemption which would enormously lighten bi the incidence and burden of flour tax would be provided in accor: ance with the modus operandi adopted in 1934 and 1935. defendant produced documents which support this contention: n question as to their accuracy is raised: but the plaintiff conte that in such cases as the present no extrinsic evidence is a The objection resembles that of the Province of Alberta in the case of Attorney-General for Alberta v. Attorney-General for Ca (3) to the effect that "the scope and effect of a legislative measu

(1) (1932) A.C., at p. 555; 47C.L.R., (2) (1930) A.C., at p. 363. at pp. 393, 394. (3) (1939) A.C. 117.

is to be ascertained by an examination of its actual provisions, and H. C. or A. it is only when expressions used in it are ambiguous or imprecise that reference may be made to extraneous material. A statute Depury expressed in unambiguous and precise terms cannot properly be me held invalid on the grounds that another statute of the same legis-

lature is invalid and that a common intention underlies both " (1).

In considering the question of admissibility of evidence, a funda- w. BU MGnie

mental distinction has to be drawn between cases where the court seek

has no function committed to it except that of interpreting a statute, and cases where, in accordance with a constitutional charter, the court has to determine whether there has been an infringement by the legislature of some overriding constitutional provision. In the former case, the court's function is to interpret the language which the legislature has employed, though, even there, the court is not bound to shut its eyes to public general knowledge of the circum- stances in which the legislation was passed.

In the latter case, the court may entirely fail to fulfil its duty if it restricts itself to the language employed in the Acts which are challenged as unconstitutional. As the Privy Council has said : "Where the law-making authority is of a limited or qualified character, obviously it may be necessary to examine with some strictness the substance of the legislation for the purpose of determin- ing what it is that the legislature is really doing" (per Duff J., x Attorney-General for Ontario v. Reciprocal Insurers (2) ).

In such cases the court is not to be over persuaded by the appear- ance of the challenged legislation. As a rule there is little need to travel beyond the words used by the legislature. Thus, under the

• guise of an expropriation by a State of a commodity within its borders and a provision enabling the person expropriated to repurchase the commodity at a higher price, the legislation may itself reveal that a forbidden method of taxation is being resorted to (Attorney-General (N.S.W.) v. Homebush Flour Mills Ltd. (3)). In that case, this court applied the well-known principle that in relation to constitu- _ tional prohibitions binding a legislature, that legislature cannot disobey the prohibition merely by employing an indirect method of achieving exactly the same result.

(1) (1939) A.C., at p. 122, (2) (1924) A.C., at p. 337,

H.C.or A. But it is often necessary to produce evidence in order to determine

os whether the executive has employed for one purpose a power which

eee can only be lawfully exercised for another (James v. Cowan (I) ). Comms. On such occasions, the field of admissible evidence is widened.

Tixatee A Similar rule applies although no executive action is involved or (N.S.W.) questioned. The issue may be whether legislation which at first vas date sight appears to conform to constitutional requirements is colourable

• or disguised. In such cases the court may have to look behind names, forms and appearances to determine whether or not the legislation is colourable or disguised. This is a fundamental principle applicable to the Constitutions of the United States and Canada as well as to that of the Commonwealth. As Lord Maugham said recently : " It is not competent either for the Dominion or a Province under the guise, or the pretence, or in the form of an exercise of its own powers, to carry out an object which is beyond its powers and a trespass on the exclusive powers of the other " (Attorney-General for Alberta v. Attorney-General for Canada (2) ). The same principle is also applicable to constitutional guarantees or prohibitions such as those contained in sec. 51 (ii) and sec. 92 (to take two examples only) of the Commonwealth Constitution. Sec. 51 (ii.) proclaims that the great power of taxation, if exercised, must be exercised "'so as not to" create a described condition of affairs. If that condition may be produced in various ways and by devious methods, it may become the duty of the court to examine closely whether the legislature has deliberately set out to produce the forbidden result although by a somewhat indirect method. In principle there is no reason whatever why public announcements of governmental policy, official governmental records and communica- tions, and even the records of the proceedings in parliament, including records of debates, must necessarily be excluded from the field of relevant evidence. In special circumstances, some of this material may afford strong, even conclusive, evidence as to the scheme, object or purpose of the statute, although, as has been said: " Generally speaking," however, "the speeches of individuals" (in the legislature) " would have little evidential weight " (3). A valuable

(1) (1932) A.C. 542; 47 C.L.R. 386. (2) (1939) A.C., at p. 130. (3) (1939) A.C., at p. 131.

discussion on the topic of the admissibility of extrinsic evidence in H. ©. or A.

telation to constitutional interpretation is contained in an article by i

Dean MacDonald (Canadian Bar Review, February 1939): See also Dervry FEDERAL Commis-

Columbia Law Review, vol. 36, p. 283, and Harvard Law Review, vol. 38, p. 6.

From the Alberta and other cases it is established that : -

(i) The court may have to examine the operation and effect of W. the impugned legislation. For that purpose evidence may be admissible (Attorney-General for Alberta v. Attorney-General for Canada (1) ).

(ii) For the same purpose, the court " must take into account any public general knowledge of which the court would take judicial notice " (Attorney-General for Alberta v. Attorney-General for Canada (1)).

(iii) The court may consider other Acts passed by the legislature whose enactment is being questioned (1).

(iv) In determining " the object or purpose of the Act in question " the court must consider '' matters of which the court would take judicial notice . . . and other evidence in a case which calls for it" (Attorney-General for Alberta v. Attorney-General for Canada (2) ).

(v) It is legitimate to look at legislative history "as leading up to the measure in question " (3) in order to determine whether the measure " instead of being in any true sense" in furtherance of a permitted purpose is " part of a legislative plan" to carry out a purpose which is not permitted (Attorney-General for Alberta v. Attorney-General for Canada (4) ).

(vi) In order to ascertain "the object and effect" of the Acts which are " part of a general scheme of legislation " it is proper to "look at the history of the legislation passed in furtherance of the general design " (Re Alberta Legislation (5), per Duff C.J.).

(vii) In applying the doctrine of general knowledge, the court's "duty as judges" may be "to take judicial notice of facts which are known to intelligent persons generally," and to reject suggested arguments if they "would be incontinently rejected by anybody

(1) (1939) A.C., at p. 130. (3) (1939) A.C., at p. 132. (2) (1939) A.C., at pp. 130, 131. (4) (1939) A.C., at pp. 132, 133. (5) (1938) 2 D.L.R. 81, at p. 83.

H.C. or A. possessing the most rudimentary acquaintance with affairs " (Re re Alberta Legislation (1) ).

Dervry (viii) In relation to taxation Acts, the court may, in order to ascertain " the real nature of the tax " look at its system of rebates, the reports of public investigations, even the name by which the tax "has come to be known" (Attorney-General for British Columbia v. McDonald Murphy Lumber Co. Ltd. (2) ), and as to report of a royal commission see Attorney-General for British Columbia v. Attorney-General for Canada (3), per Lord Atkin.

In attempting an analysis of the present scheme of taxation of the Commonwealth, I have examined it with relation to the actual operation and effect of the legislation. This course is warranted by proposition i (supra).

It will next be shown that the Commonwealth Acts are part of a general scheme or plan of legislation. To prove this fact, extensive recourse to the so-called " extrinsic" evidence is not required, for in the preamble to the Wheat Industry Assistance Act, the validity of which (as part of a scheme of discriminatory taxation) is challenged, the Commonwealth Parliament has itself declared (a) that at a conference between the Commonwealth and the States held on 29th August 1938 " the co-operation of the Government of the Common- wealth was sought in putting into operation a scheme to ensure to wheat growers a payable price for wheat," (b) that it was represented at the said conference that the scheme would require " that a tax

be imposed on flour sold for home consumption in Australia " and that the proceeds thereof should be distributed among wheat growers, and (c) that the Commonwealth agreed to " co-operate in the said scheme."

In view of these recitals, a reference to the conference of 29th August 1938 between the Prime Minister and the Premiers of the States is not only permissible but necessary in order to identify "the scheme " to which the Commonwealth was adhering by giving it legislative effect. At the conference, the Premier of New South Wales stated to the Prime Minister that, on 26th August, the Premiers had "unanimously arrived at certain definite conclusions" as follows : -

(1) (2908) 2 DLR, ae (2) (1930) A.C. 357, at p. 363. (3) (1937) A.C., at p. 376,

(1) That this conference affirms the necessity of action being taken to ensure to wheat growers a payable price for their product.

(2) That, as a first step of urgent national importance the Govern- ments of the Commonwealth and the States should take such immediate joint action in their respective jurisdictions as is necessary to implement a home-consumption-price plan in the season 1938- 1939 and following seasons : such plan to be based on an equalization levy on wheat or flour (used for home consumption) collected under the excise power of the Commonwealth.

(3) That such a proposal should also ensure a stable home-con-

sumption price of flour and bread in the various States at a level fair to both producer and consumer based on a home-consumption price of 4s. 8d. a bushel at country sidings for wheat, or its equivalent, special arrangements to be made (as on former occasions) to meet the special circumstances of Tasmania. ; (4) That it is of vital importance that such proposal be of a long- range character, and placed on a sound legal, financial and commer- cial basis from the outset, and not left vulnerable to legal challenge or dependent on voluntary co-operation.

(5) That conference is unanimously of opinion that it is impossible to devise any practicable plan based on voluntary co-operation of growers, millers and merchants.

(6) This conference has received several proposals from farmers' organizations for the institution of a permanent price equalization _ fund built up by contributions from the Commonwealth and wheat _ growers. The conference is of opinion that they are worthy of : detailed examination, and as they involve Federal finance, this

conference submits them to the Federal Government for considera- tion.

For present purposes, the crucial part of the scheme was the agreement, stated in head 3 above, viz., " special arrangements to be made (as on former occasions) to meet the special circumstances of Tasmania." The Premier of New South Wales, as spokesman

_ for all the Premiers, explained this vital provision as follows : -

"T repeat that State action would involve the fixing of a home-consumption price for wheat. We exempt from the influence of that fixation wheat used for the poultry industry, and give a special exemption in respect of Tasmania, which does not produce wheat extensively. Similar special arrangements

SIONER OF Taxation (N.S.W.) v. W. R. Moran Pry. Lrp.

798 HIGH COURT [1939. H.C. oF A. have been made heretofore, and we feel that in order to make the proposals 1939. operate fairly in their incidence throughout the Commonwealth, an exemption bes 54 should be made in respect of that one State." oe At a later stage in the conference, the Premier of Tasmania, also x

Coymus- addressing the Prime Minister of Australia, who (as is well known) STONER OF

was a representative of Tasmania in the Federal Parliament, said : -

"Tasmania is in entire agreement with the views expressed by Mr. Stevens,

and supplemented by his colleagues. As I concur in these views I do not think

that any useful purpose would be served by reiterating them. You, sir, know

the position of Tasmania just as I know it myself. 'This position was recognized

in 1934-1935, and Mr. Stevens has this morning again acknowledged the State's

special circumstances. Tasmania is the only State which has to import the whole of its wheat for flour-milling purposes.""

Thus we see that an important part of the scheme which the States were proposing to the Commonwealth and which the Commonwealth

subsequently accepted was that special arrangements were to be made (as on former occasions) to meet the special circumstances of Tasmania. The "former occasions" referred to the schemes of 1934 and 1935 by which flour tax, although collected by the Common- wealth on all flour consumed in Australia, was refunded to Tasmania and handed back to taxpayers and others in all cases where the flour was consumed in Tasmania. In 1938, the spokesman of the State Premiers described what was done in 1934-1935 as a " special exemption in respect of Tasmania" and as "an exemption . . - in respect of that one State." What was to be done in 1938 was to be a "special arrangement . . . as on former occasions." In other words, the Commonwealth was being asked to agree to a scheme of taxation from which the State of Tasmania would obtain a special exemption.

We have already observed that, in the present year, the scheme of exempting Tasmanian consumed flour corresponds in all essentials to the scheme of 1934-1935. Although it may not be strictly neces- sary, I now furnish several additional references in order to make clear the nature of the " arrangements " made by the Commonwealth in 1934-1935 which the Commonwealth agreed to reproduce in 1938.

(1) In 1934-1935, the Federal Commissioner of Taxation was authorized by the Commonwealth to disclose to Tasmanian officials information to assist them in making refunds in respect of Tasmanian consumed flour only and to prevent millers from retaining the refund if the flour went into consumption in any of the other States.

(2) The practice in 1934-1935 was then stated on behalf of

"In order to ensure that the flour in respect of which the refunds of tax are made is consumed in Tasmania and not exported, the Department takes a bond from the taxpayers conditioned on the flour being consumed in Tasmania. So long as the flour in respect of which the refund of tax is made is consumed in Tasmania, the Department takes the view that it is not concerned as to the manner in which the flour is ultimately consumed, whether in the form of bread or biscuits ; but it takes precautions to see that none of the flour which is in effect free of tax is exported from the State."

(3) On 12th June 1934 the Tasmanian Premier in a letter to the Prime Minister said, inter alia: "So far as the State Government is concerned, the flour tax can be refunded only from amounts received from the Commonwealth for that implied purpose." (Italics are mine.)

(4) On 11th December 1934, in connection with the legislation then being prepared to impose a flour tax, the Tasmanian Premier telegraphed to the Commonwealth Prime Minister: '" Would appreciate urgent advice as to precise terms of amendment proposed by Commonwealth providing for payment of grant to this State to be applied towards refund of flour tax."

(5) In December 1935, the Prime Minister and the Premier of Tasmania exchanged the following telegrams in relation to the legislation enacted in that month and previously referred to in this opinion : -

From Prime Minister to Premier : - " Legislation now before Parliament provides for continuance of present flour tax. It is proposed to submit a Bill to Parliament before it rises on Friday providing for payment to your State of £4,300 per month during period of continuance of tax commencing from January 7th to enable rebates at present rate of £2 1s. per ton to be continued by your Government. I shall be glad of your assurance that in the event of this legislation being passed rebates will be continued by your Government at present rate during currency of tax. Would appreciate reply by noon 'Thursday 5th. , I may add that Act was passed by Parliament to-day authoriz- ing payment not exceeding £4,500 for period up to January 6th."

From Premier of Tasmania to the Prime Minister : - " Reference your letter- gram of to-day's date flour tax legislation. My Government undertakes that in event of Bill being passed flour tax rebates will be continued at present rates during currency of tax provided that payment to this State of £4,300 per month is made during period of continuance of tax."

This evidence is admissible to show the clear understanding by the Commonwealth in 1934-1935 that the purpose of the special

Deputy FEDERAL Comaus- SIONER OF Taxation (N.S.W.) v W. R. Moran Pry. Lap.

aes: Derury FEprraL Commis- SIONER OF TaXaTION (N.S.W.)

grants made and to be made to Tasmania was to furnish Tasmania with the money to enable rebates to be made where the flour had been consumed in Tasmania. The evidence as a whole clearly establishes that the "special arrangements" made "on former occasions " were arrangements by which the Commonwealth, without making a direct and specific exemption, paid to Tasmania moneys to enable refunds of tax to be paid to Commonwealth taxpayers in respect of flour consumed in Tasmania. The Acts, the executive action taken, the modus.operandi and the correspondence all show that the Commonwealth's purpose in making special payments to the Tasmanian Government was to enable flour consumed in Tasmania to be exempt from tax, in whole or in part, while flour consumed elsewhere in the Commonwealth was to bear the full burden of the tax.

Even in relation to the present legislative scheme, there is evidence which strengthens the inference that the object and purpose of the Commonwealth's special grant to Tasmania under sec. 14 was to refund tax wherever the taxed commodity was consumed in Tas- mania. On 30th November 1938, two days before both the Common- wealth and Tasmania passed their respective Acts, a telegram from the Premier of Tasmania to the Prime Minister of the Commonwealth referred to clause 14 (which became sec. 14) of the Wheat Industry Assistance Bill. At that time, the clause fixed the grant to Tasmania by reference to the amount of flour tax " collected" in Tasmania. The Premier of Tasmania demanded that the Commonwealth legis- lation should conform to the precedents of 1934 and 1935 and that the amount of the special grant should be determined by reference to the amount of flour tax collected "in respect of flour consumed

If amount of rebate of flour tax is to be based on collections in Tasmania difficult questions will arise as to inclusion of imported flour for purposes of flour tax remission, Commonwealth Government has insisted on inclusion of imported flour and we agree that this is desirable. If rebate is to be made in respect of imported flour under present proposal the amount of rebate will fall short of the amount of tax by considerable sum. It will be remembered that my concurrence in plan agreed on at Premiers' Conference and Conference of Commonwealth and State Ministers was conditional on same treatment being given to this State as in 1934 and 1935 when amount of special grant for flour tax remission was based on consumption of flour in this State. I therefore

urge Commonwealth Government to alter clause 14 of Bill so as to reproduce H.C. or A. ; same results as achieved by the Whealgrowers Relief Act 1934-1935, sec. 9. 1939. Wheat Products Bill is now in Legislative Council and can be disposed of this | week if satisfactory arrangements are made with respect to remission of flour Beast! : tax. If, however, provisions of Wheat Industry Assistance Bill are not altered 'Cownne,

I can give no assurance that price-fixing Bill will be passed." SIONER OF TAXATION

It is to be observed that every word and phrase of this telegram (y is consistent with, and consistent only with, the conclusion that both W. R. Mona _ the Commonwealth and Tasmania recognized the real purpose of Pry. Lx. the "special grants" made and to be made by the former to the Evatt.

latter. The demand made by Tasmania was acceded to by the

Commonwealth, and clause 14 was altered so as to conform to the precedents of 1934 and 1935.

From whatever angle the matter is approached, the inference is arresistible that sec. 14 of the Wheat Industry Assistance Act 1938 was passed by the Commonwealth with the object of enabling flour -consumed in Tasmania to obtain a practical exemption from flour 'tax by means of (a) a " grant" to Tasmania out of the fund provided

_ by the receipts from the flour tax, (b) employment by Tasmania of the " grant " for the purpose of refunding the tax to those who had

Here it is convenient to deal with several contentions made on behalf of the plaintiff that sec. 14 of the Wheat Industry Assistance Act is not a law with respect to taxation because it deals with the

__ disbursement of Commonwealth moneys. No doubt it does authorize 'the disbursement of moneys. But the question whether sec. 14 is a ___ law with respect to taxation depends upon the prior question whether _ the real purpose of sec. 14 is to effect a refund of part or all of the tax. If so, sec. 14 is a law with respect to taxation just as much as are provisions with respect to refunds of tax which in themselves merely authorize disbursement of moneys and which are usually contained in tax assessment Acts. In short, it is impossible to dissociate sec. 14 from the purpose which has been stamped upon it by the Common- -wealth's adherence to the scheme. The same finding as to the true purpose of sec. 14 also disposes of "the argument that, inasmuch as sec. 96 enables the Commonwealth 'to make a grant of financial assistance and to make it to one State

_ only, sec. 14 is authorized by the Constitution itself. The broad :

answer to the argument is that sec. 96 cannot be employed for the: very purpose of nullifying constitutional guarantees contained elsewhere in the Constitution. For instance, it was not and could not be contended that, in defiance of sec. 92 which provides for inter-State freedom of trade and which binds Commonwealth and State alike, the Commonwealth could make a grant (under sec, 96) of money to one or all of the States for the express purpose of enabling" the States to discriminate against inter-State trade, e.g., by sub- sidising traders on condition that they did not engage in inter-State trade : or that, in face of sec. 99, which precludes the Commonwealth from enacting commercial laws which give a preference to one State over another, the Commonwealth could grant moneys to one State: for the express purpose of enabling that State to subsidise traders. engaged in inter-State trade on condition that they resided in such State or employed a certain proportion of employees who belonged to trade-unions registered in that State.

In these instances, the Commonwealth, while purporting to grant. money to a State under sec. 96, would in reality be authorizing the employment of its funds for the sole purpose of infringing con- stitutional prohibitions ; and it is clear that sec. 96 cannot be used as an instrument for such a purpose.

Sec. 96 was referred to in the case of Victoria v. The Commonwealth (1), where the validity of the Federal Aid Roads Act 1926, was affirmed. by this court. The only substantial ground upon which its validity was attacked was that inasmuch as road making was not a function. committed to the Commonwealth under sec. 51 of the Constitution, the Commonwealth could not impose a term or condition upon its. grant of money to a State that the money must be expended upon

The court held that the particular Act was not affected by sec. 99 of the Constitution which deals only with laws of " trade, com- merce or revenue." The Act did not relate to trade or commerce ;. and it dealt with Commonwealth expenditure, not with its revenue. The decision does not even suggest that the power under sec. 96 can be invoked for the very purpose of nullifying the prohibition of discrimination in Commonwealth taxation laws which is enacted. by sec. 51 (ii.).

Sec. 96 has been regarded as raising several difficulties. One of them is whether the power of the Parliament to grant financial assistance was not terminated when the Braddon clause (sec. 87) terminated. The words in sec. 96 are verbatim the same as those in sec. 87, and perhaps the court should take judicial notice of the fact that the two sections were closely associated with each other

Dervry FEDERAL Comms- STONER OF Taxation (N.S.W.) v

and may well have been intended to stand together and terminate W. R. Morax

together. The difficulty is accentuated by the fact that if sec. 96 is read otherwise, and its operation ceases only when parliament otherwise provides, this would seem to contemplate the possibility that one Parliament is authorized to bind itself and its successors in a way which can hardly have been intended. However that may be, it seems clear that sec. 96 cannot be relied upon in the present case.

It was also contended for the plaintiff that "the discrimination

is the result of State action and does not affect Federal legislation " and that even if the Tasmanian Flour Tax Relief Act is invalid, sec. 14 is not invalidated. Again the answer depends upon whether sec. 14 is to be stripped of its disguise. If its purpose is to establish taxation discrimination in favour of Tasmania, it is clearly invalid. But the Tasmanian Flowr Tax Relief Act is not thereby invalidated. The State of Tasmania is not bound by sec. 51 (ii.) of the Constitution. All that happens is that the special grant under sec. 14 is unauthorized by law, so that there is nothing upon which the Tasmanian Act can operate. It is erroneous to assume that the taxation discrimination is the result of the Tasmanian Act. Tt is the result of the combined operation of the Commonwealth's imposition of flour taxes and the Commonwealth's special grant to one State for the purpose of refunding the tax to Commonwealth taxpayers who are associated with that one State.

The further contention that the taxing scheme is not legally binding on the Commonwealth or any of the States is quite mis- conceived. The injunction of sec. 51 (ii.) regards such a question as irrelevant. The injunction concerns itself solely with the operation of Commonwealth taxing laws. Do they, or do they not, at the moment of their operation discriminate as laws between States ? If yes, they infringe sec. 51 (ii), whether or not the Commonwealth

H.C. or A. has made an arrangement or bargain to enact them. The existence es of the bargain or scheme is of importance, not as establishing a binding Dervry legal bargain, but as evidencing the real nature of the legislation Cea enacted in pursuance of the scheme.

TONER oF Tt has also been suggested that the decision of the Privy Council (NS.W.) in Colonial Sugar Refining Co. Ltd. v. Irving (1) is applicable to the W. R. Moran present case. There it was contended that the Commonwealth Prr. Lm. Poise Tariff 1902 was ultra vires of the Commonwealth Parlia- Evatt J- nent upon the ground that sec. 51 (ii.) was infringed. Under that Act, an exemption from the duties imposed was granted in respect of goods on which customs or excise duties had already been paid under State legislation passed before the States powers on those topics was excluded. The scale of duties was not uniform through- out the several States, and in the State of Queensland no excise duty at all had been imposed upon sugar. As a result of such lack of uniformity "the exemption operated unequally on the traders and manufacturers of the several States" (2). It was argued that

this inequality of consequence infringed sec. 51 (ii.).

It is difficult to understand how, as a law, the enactment of the exemption (which applied equally to all the States) could be regarded as affecting any discrimination between States. Similar legislation has always been recognized as permissible. For instance, in estimating the Commonwealth estate duty, deductions from the value of the estate of the amount of probate or succession duties payable in any State have always been allowed and authorized by Commonwealth law. The fact that the quantum of such duties may vary in the several States and that in one or more States they may not be imposed at all would not make the Commonwealth law discriminate as a law. As the Privy Council said, " the rule laid down by the Act is a general one, applicable to all the States alike, and the fact that it operates unequally in the several States arises not from anything done by the Parliament, but from the inequality of the duties imposed by the States themselves " (3).

Similarly, if the Commonwealth levied an excise on a commodity

which in fact was being produced in one State only, there would be

(1) (1906) A.C. 360. (2) (1906) A.C., at p. 367. (3) (1906) A.C., at p. 367.

61 C.L.R.] OF AUSTRALIA. 805. no infringement of sec. 51 (ii.) so long as the Commonwealth tax H.C. or A. extended to the commodity wherever in Australia it was produced. Habis

As in the case of a constitutional requirement of uniformity " what the Constitution commands is the imposition of a tax by the rule of geographical uniformity, not that in order to levy such a tax objects must be selected which exist uniformly in the several States" (Knowlton v. Moore (1) ).

But the present taxing enactments of the Commonwealth stand on a very different footing, unless of course the action of Tasmania

in refunding tax to Commonwealth taxpayers was quite unrelated to the enactment of the Commonwealth in making available to Tasmania portion of the moneys collected from the imposition of the same tax. Upon the assumption that the object of sec. 14 of the assistance Act is as has already been described, the discrimination established is not constituted by mere unequal operation in the States through casual or accidental features of the laws of those States ; the case is one where discrimination is aimed at and achieved by the Commonwealth Act, with the favoured State playing the subordinate role of executant of the Commonwealth's scheme for refunding the tax. If this is the correct view of the legislation of the Commonwealth, the case of the Colonial Sugar Refining Co. Ltd. vy. Irving (2) is valuable by way of contrast only.

The legal result of all these considerations is clear. The relevant Commonwealth Acts have been analysed in relation to (a) their necessary operation and effect, (b) the history of the scheme adopted by the Commonwealth in 1934-1935, (c) the executive action taken by the Commonwealth Minister under sec. 14 at a time when the Tasmanian Flour Tax Relief Act was already on the statute book, (@) the recital in the Wheat Industry Assistance Act of the Common- wealth's co-operation with the States in a certain scheme, (e) an analysis of the heads of the scheme so far as it was based on the exercise by the Commonwealth of its powers of taxing flour, (f) an investigation of the meaning of that portion of the scheme by which it was agreed that "special arrangements . . . as on former occasions " were to be made for Tasmania, and (g) a consideration

(1) (1900) 178 U.S. 41, at p. 108; 44 Law. Ed. 969, at p. 996. (2) (1906) A.C. 360.

of what the Commonwealth Parliament and executive did on such "former occasions " as well as the preparation for and the operation of its taxing laws on the present occasion. The conclusion is that the present scheme of Commonwealth taxation was devised with the very object of exempting all flour consumed in Tasmania from the principal burden of the tax. The co-operation of Tasmania in the general scheme of wheat stabilization was purchased at the price of exempting Tasmanian consumers from the burden of a tax which all other Australian consumers are called upon to bear. Up to the present time, the effective exemption has amounted to over 90 per cent of the tax.

The truth is that every well-informed person in Australia is aware that, in pursuance of prior design, the present flour tax applies to all flour manufactured and consumed in the Commonwealth, but that two exemptions obtain. One exemption is in relation to flour used in the Northern Territory, which, not being a State of the Commonwealth, is not affected by sec. 51 (ii.) of the Constitution. The other applies in relation to flour consumed in Tasmania where the taxpayer gets a refund of at least 90 per cent of the tax. In other words, everyone in Australia knows well that, contrary to the express prohibition of sec. 51 (ii.), the scheme of flour taxation designedly creates an exemption in favour of Tasmania. If the court to which the protection of the Constitution is committed is willing to shut its eyes to facts which are so well known, then, if I may adopt Lord Atkin's phrase, used in another connection, "the con- stitutional charter might as well be torn up " (1).

The final contention of the defendant was that, assuming sec. 14 of the Wheat Industry Assistance Act to be invalid, the Common- wealth Acts imposing the flour tax are separable and valid. But the Commonwealth's scheme of taxation is constituted by the series of Acts Nos. 48 to 53 inclusive. If, as I have held, there has been an infringement of sec. 51 (ii.), it must follow that, in the absence of an express statutory indication to the contrary, the Acts which make up the entire scheme, and are sufficiently expressed as doing so, are invalid.

It is correct to say that, if sec. 14 of the Wheat Industry Assistance Act had not been included in the scheme, the residue of the Common- wealth's taxing scheme would have been valid. The difficulty is that the taxing scheme is one and indivisible. Moreover, but for the fact that sec. 14 worked an exemption in Tasmania's favour, it seems certain that Tasmania would not have become a party to the scheme ; in that event the States would not have been unanimous ; and the Commonwealth might well have refrained from accepting responsibility for taxing flour with a view to increasing the price of bread to the ultimate consumer.

Sec. 15a of the Commonwealth Acts Interpretation Act 1901-1937 lays down a general rule of construction which is in conformity with the general principle wt magis valeat quam pereat. If invalid and unconstitutional provisions can be discarded, the court may allow valid and constitutional provisions to remain effective. But a series of cases has established that where the infringing provisions can only be removed at the price of disturbing a general legislative scheme, all the enactments which go to make up the scheme must fall (Australian Railways Union v. Victorian Railways Commis- sioners (1) ; Huddart Parker Ltd. v. The Commonwealth (2) ; Vacuum Oil Co. Pty. Ltd. v. Queensland (No. 2] (3) ; McDonald v. Victoria (4) ).

"in the Australian Railways Union Case (1) the court held that sec. 33 as well as sec. 34 of the amending Commonwealth Arbitration Act of 1930 was invalid because the two sections were regarded as essential portions of one statutory scheme which stood as a whole or, if part of it fell, fell as a whole. Insuch a case sec. 154 of the Commonwealth Acts Interpretation Act was thought to be incapable of operation. The feature of the Vacuum Oil Case [No. 2] (3) was that the oil companies were required to purchase such quantity of power aleohol as was measured by a fixed percentage of 'every one hundred gallons of motor spirit sold.' In the case of legislation so framed, it was impossible to exclude any portion of the total sales, for that would completely revise and rewrite the required statutory formula " (5).

Further, in every case where an exemption from taxation on a basis contrary to sec. 51 (ii.) is granted by the Commonwealth Parliament, the discrimination results, not alone from the provisions which exempt the favoured State, but from those provisions coupled

(1) (1930) 44 C.L.R. 319. (3) (1935) 51 C.L.R. 677. (2) (1931) 44 CLLR. 492. (4) (1937) 58 C.L.R. 146. (5) (1937) 58 C.L.R. 146, at p. 153.

H.C. or A. with the operations of other provisions of the scheme upon the

ra remaining States of the Commonwealth. It would be difficult to apply

Derury sec. 15a to such a state of affairs, because the court cannot assume iy that the exemption was merely an accidental or subordinate feature of the taxing scheme. Moreover, to regard the exemption as invalid would be to add to the net yield of the tax and so increase the total « burden of the people, a course which parliamentary practice usually

In this particular case, the exemption or refund provision con- stituted by sec. 14 is affirmatively shown to be an essential part of the scheme. To that scheme in all its parts, the Commonwealth adhered. The balancing of funds and accounts required by sec. 6 of the Wheat Industry Assistance Act would be disturbed, if sec. 14 alone was treated as invalid and void. In short, to quote from a well-known judgment of the Privy Council, " the offending provisions. are . . So interwoven into the scheme that they are not sever- able " In re The Initiative and Referendum Act (1) ).

In the result it becomes unnecessary to examine in detail the other contentions raised by the defendant. They were ably presented by counsel, but I am satisfied that, subject to one exception, they cannot be acceded to. That exception is the contention alleging an infringement by the Commonwealth of sec. 92 of the Constitution. This stands on a different footing, but it is dependent on the main argument that there has been a discrimination contrary to sec. 51 (ii.).

In principle it is difficult to see how, in case of an excise duty laid by the Commonwealth upon a commodity manufactured and sold within Australia, the mandate of sec. 92 will not be disobeyed if the Commonwealth exempts the commodity from tax in case it is. consumed in a particular State ; in such circumstances every dealing in the commodity, whether intra-State or inter-State, will be taxed, except dealings which will result in the final delivery of the commodity in the favoured State.

Thus the sale to the other States of Tasmanian manufactured flour will bear the full burden of the tax; every local sale of the same flour will be practically exempt. This seems to be a plain discrimination against selected inter-State dealings in flour solely

because they are inter-State dealings of the selected character. H.C. or A. Discrimination is not expressly forbidden by sec. 92, but in certain eS eases the proof of discrimination may show conclusively that the Dzrvry

trade freedom of the border has been unconstitutionally restricted (eanh'" (Riverina Transport Pty. Ltd. v. Victoria (1) ). SIONEE OF

This point need not be elaborated because my opinion is that, because the Commonwealth flour-taxing scheme discriminates in W. R. favour of Tasmania contrary to sec. 51 (ii.), the Acts imposing the share

tax are invalid. McTiernan J. I agree with the judgment of the Chief Justice. Judgment for the plaintiff for the amount claimed.

Solicitor for the plaintiff, H. F. L. Whitlam, Commonwealth Crown Solicitor.

Solicitors for the defendant, H. O. Marshall, Lupton & Scott.

Solicitor for the States of New South Wales, Victoria and South Australia (intervening), J. Z. Clark, Crown Solicitor for New South Wales.

Solicitors for the State of Tasmania (intervening), Allen, Allen &