Dickenson's Arcade Pty Ltd v Tasmania

A fee of $2 for a licence to sell tobacco by retail from specified premises would not itself be a duty of excise. Two dollars is, however, but the minimum fee in a graduated scale calculated by reference to the value of an average monthly purchase of tobacco over a previous twelve monthly period. The problem is whether such a graduated scale of fees is a tax directly related to goods imposed at a point before retail sale, or a personal tax upon a person seeking a licence to sell tobacco upon particular premises in the future, calculated by reference to past purchases but not upon such purchases.

In my opinion Dennis Hotels Pty. Ltd. v. Victoria [1] is authority against treating the tax as a duty of excise.

Counsel for the plaintiff challenged the correctness of that part of the decision in Dennis Hotels Pty. Ltd. v. Victoria [1] , which established that the fee imposed by s. 19 (1) (a) of the Licensing Act Vict. for a victualler's licence was not a duty of excise, and relied upon that part of the decision which established that the fee for a temporary victualler's licence imposed by s. 19 (1) (b) of the Act, to the extent to which they were upon the purchase of liquor produced in Australia, were duties of excise.

In my opinion there is no conflict between the two parts of the decision in Dennis Hotels Pty. Ltd. v. Victoria [1] , and this case is governed by the first. The fees here are entirely different from the fees for temporary licences which were invalidated. Those fees were a percentage of purchases for sale. There is one particular matter to which I should refer. Counsel for the plaintiff sought to gain support from the judgment of Fullagar J. but did so by what I regard as unsound reasoning. The decision of his Honour was that fees payable under s. 19 (1) (a) and (b) were not duties of excise. His judgment is authority for the reasoning leading to that conclusion and for nothing else. It cannot be derived from his judgment that, had his Honour not reasoned as he did, he would have come to a different conclusion, and because his actual reasoning is now to be regarded as unacceptable, a different conclusion should be attributed to him and his judgment treated as authority for reasoning which it is said would have supported a contrary conclusion to that at which he did arrive. So to use an authority is, in my opinion, to abuse it. It is not to be supposed that, had Fullagar J. not taken the course which he did involving the rejection of earlier authorities, he would have decided that s. 19 imposed duties of excise. All that is or can be known is that his Honour decided as he did for the reasons which he gave. I am certainly not prepared to assume that his actual decision would have been different had he decided to follow the authorities which he rejected. He could, and I think would, have upheld s. 19 upon other grounds.

In any event I would not reopen either part of the decision in Dennis Hotels Pty. Ltd. v. Victoria [1] . It is an important decision upon the faith of which States have ordered their affairs for some thirteen years. The decision has been recognized both in Bolton v. Madsen [2] and in Anderson, Pty. Ltd. v. Victoria [3] .

1. (1960) 104 C.L.R. 529. 2. (1963) 110 C.L.R. 264. 3. (1964) 111 C.L.R. 353.

Finally, I would say that s. 90 of the Constitution makes exclusive the power of the Parliament of the Commonwealth to impose duties of customs and of excise and to grant bounties upon the production or export of goods, but beyond this it does not go. The character of a duty of customs or of excise is a matter for this Court upon which the Constitution gives no guidance beyond what is found in s. 90 itself and in ss. 55, 92, 93 and 95. The words of the Constitution do not warrant the generalization of Rich J. in The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia (the Petrol Case) [4] that "the Constitution gives exclusive power to the Commonwealth over all indirect taxation imposed immediately upon or in respect of goods, and does so by compressing every variety thereof under the term "customs and excise" ". Upon this aspect of the matter I would wish to add but one consideration to what I wrote in Dennis Hotels Pty. Ltd. v. Victoria [1] ; it is that power to grant bounties made exclusive by s. 90 is likely to be co-extensive with the exclusive power to impose duties of customs and duties of excise. The one is naturally the corollary of the other. The former power is limited to "bounties on the production or export of goods". I associate the word "production" with "excise" and "export" with "customs". These, and imports, are the particular matters to which s. 90 relates. Its subject-matter is not indirect taxation nor control of the economy of Australia. A wide conception of what is a duty on production has eventually been established but that conception is still confined to a tax directly related to goods imposed at some step of their production or distribution. I have already referred to what was said on this matter in Bolton v. Madsen [2] and I merely add a reference to the form of words adopted by Kitto J. in Dennis Hotels Pty. Ltd. v. Victoria [3] , namely that an excise is a tax upon "the taking of a step in a process of bringing goods into existence or to a consumable state, or passing down the line which reaches from the earliest stage in production to the point of receipt by the consumer". These words were quoted with approval in Bolton v. Madsen [4] . A tax falling within these formulations is a duty of excise; a tax which does not so fall is not a duty of excise notwithstanding that it may be indirect and may affect the economy.

1. (1926) 38 C.L.R., at p. 437. 2. (1960) 104 C.L.R., at pp. 582, 585. 3. (1963) 110 C.L.R., at p. 271. 4. (1960) 104 C.L.R., at p. 559. 5. (1963) 110 C.L.R., at p. 273.

In my opinion, for the reasons stated, the licence fees imposed by Pt III and IV of the Tobacco Act and the Tobacco Regulations Pt III are not duties of excise; they are personal taxes for a franchise to sell tobacco in Tasmania. The plaintiff sought a declaration that they are duties of excise. The defendant demurred on the ground that "none of the provisions of Pt III and Pt IV of the said Act or of the regulations made thereunder impose a duty of excise contrary to the said s. 90".

I would, for the foregoing reasons, uphold this demurrer.

In this action the plaintiff, which carries on business in Tasmania as a retailer of tobacco products, seeks declarations that the Tobacco Act, 1972 Tas. ("the Act") and the Tobacco Regulations 1972 ("the regulations") made thereunder impose duties of excise and are therefore beyond the legislative power of the State by reason of the provisions of s. 90 of the Constitution and are invalid.

The Act and regulations impose two taxes which call for separate consideration. The first of these, which is imposed by Pt II of the Act, is described as a "tax on the consumption of tobacco". Section 3 (1) provides that "In accordance with this Part a tax is imposed on the consumption of tobacco". The amount of the tax is seven and a half per cent of the value of the tobacco consumed (s. 3 (2)). Unpaid tax is recoverable by the Commissioner of Taxes "as a debt due to the Crown incurred by the person by whom the tobacco was consumed" (s. 3 (3)). If tax is not paid before the expiration of seven days after the tobacco is consumed, the consumer is guilty of an offence (s. 3 (4)). The provisions of s. 3 (5) are as follows:

Where the tax has been paid in respect of the consumption of any tobacco and, on application being made to him within three months of that tax being paid, the Commissioner is satisfied that that tobacco has not been, and will not be, consumed, he shall refund the amount of that tax to the person by whom it was paid or, if he has died, his legal personal representatives. The consumption of tobacco brought into the State by a traveller for his own consumption or for disposal by way of gift does not attract tax provided that the tobacco is consumed within twenty-eight days after it is brought into the State (s. 4 (1)). Exemption from the tax may be granted where the tobacco is required to be consumed for educational or scientific purposes (s. 5). The value of tobacco, for the purposes of the Act, is to be "taken to be the price at which tobacco of that kind (together with any package or container in which it is ordinarily contained) is ordinarily sold by retail" (s. 6 (1)). Where tobacco is of a kind not ordinarily sold by retail its value is to be assessed by the Commissioner "at such amount as he considers just having regard to the prices at which tobacco is sold by retail" (s. 6 (2)). Sums received by the Commissioner by way of tax shall, except as otherwise provided (that is, apparently, in the case of refunds under s. 3 (5)), be paid into Consolidated Revenue (s. 8).

Provision for the payment and collection of the tax is made by the regulations. The Commissioner is empowered to make arrangements with the occupier of premises on which a retail tobacco business is carried on or with the person carrying on, or proposing to carry on, that business, for the collection of the tax payable in respect of the consumption of tobacco that is sold on those premises in the course of that business (reg. 4 (1)). It is an offence to carry on on any premises, or cause or allow to be carried on on any premises a retail tobacco business unless arrangements made under this regulation are in force in respect of that business (reg. 4 (8)). Under arrangements thus made a collector is to be appointed who accounts to the Commissioner (reg. 4 (2); reg. 5). The obvious intention of the regulations is that an intending consumer, who buys tobacco from a retailer, will pay the tax to the collector, who will no doubt be the retailer or his servant or agent. However, a person who buys tobacco is not obliged to pay the collector. If he does not do so he must notify the Commissioner that he has possession of the tobacco (reg. 17) and when the tobacco is consumed he must pay the tax to the Commissioner (reg. 2 (2)).

The second tax, imposed by Pt III of the Act, is described as a fee payable by the holder of a licence. By s. 9 no person may carry on on any premises a retail tobacco business, or cause or allow any premises to be used for the sale of tobacco by retail, or sell tobacco by retail, unless authorized by licence. By s. 10 the Treasurer is given power to grant two kinds of licences - ordinary retailer's licences and vending machine licences. Any such licence if not granted in respect of an annual period (which means either a period of twelve months commencing on the first day of July next following the grant of the licence or a period commencing on a day specified in the licence and ending on the thirtieth day of June next following the grant thereof - s. 10 (5)) is called an occasional licence (s. 10 (6)). The Treasurer has power, on the application of the licensee and a proposed transferee, to transfer a licence (s. 10 (7)). In exercising his powers under s. 10 the Treasurer is required to "have regard to public necessity, convenience, and welfare" (s. 10 (9)). Provision is made for an appeal from a refusal by the Treasurer to grant a licence (s. 16). A fee is payable to the Treasurer in respect of the grant of any licence. The fee payable in respect of the grant of a ordinary retailer's licence (other than an occasional licence) is an amount determined in accordance with the 1st Sch. by reference to "the monthly stock value" for the premises in respect of which the licence is granted for "the relevant assessment period" (s. 11 (2)). For the purposes of this provision "the monthly stock value" for premises for the relevant assessment period is the average value, over that period, of the tobacco handled in a month in the course of the retail tobacco business carried on on those premises during that period, and "the relevant assessment period" is the period of twelve months ending six months before the commencement of the period in respect of which the licence is granted (s. 11 (3)). The 1st Sch. provides that where the monthly stock value does not exceed $500 the amount of the fee is $2 and where the monthly stock value exceeds $500 the amount of the fee is an amount equivalent to thirty per cent of "the assessable stock value" or $2, whichever is the greater. For the purposes of the schedule "the assessable stock value" is equivalent to the monthly stock value if that is not less than $600, but in a case where the monthly stock value is less than $600 the assessable stock value is the amount of the monthly stock value less an allowance equivalent to an amount of $500 reduced by five times the amount by which that monthly stock value exceeds $500. The effect of these provisions is that the fee payable is two and a half per cent of the value of the tobacco handled in the relevant assessment period where that value is not less than $7,200; where that value is less than $7,200 but more than $6,000 the fee is in effect two and a half per cent of a sum, less than that value, calculated as shown in the schedule, and where that value is $6,000 or less a fixed fee of $2 is payable. The value of tobacco sold by means of a vending machine is not included in these calculations (s. 11 (4)). For the purposes of s. 11 the value of tobacco at any time shall be taken to be the price at which at that time it (together with any package or container in which it is contained) would ordinarily be expected to be sold by retail (s. 11 (5)). Section 11 (6) provides as follows:

The monthly stock value for any premises for a relevant assessment period shall be determined by the Treasurer, and where no retail tobacco business was carried on on the premises during that period, or during any part thereof, or the Treasurer is satisfied that, for any reason, it is not practicable for that monthly stock value to be determined in accordance with paragraph (a) of subsection (3) of this section he shall determine that monthly stock value at such amount as he considers, having regard to the provisions of that subsection, to be just and reasonable in the circumstances of the case. An appeal lies from the Treasurer's determination of value - s. 16 (3). Where a licence is granted in respect of an annual period not exceeding three-quarters of a year in length the amount of the fee that would otherwise be payable is reduced by one-quarter for each whole quarter of a year by which the length of the annual period is less than a year (s. 11 (8)). The fee for a vending machine licence (other than an occasional licence) is fixed by the 2nd Sch. by reference to the capacity of the vending machine (that is, the maximum number of packets of cigarettes that it can contain), but if a licensee makes an election within the time and manner prescribed the fee is then to be thirty per cent of the monthly stock value determined in a similar manner to that prescribed in respect of an ordinary retailer's licence (s. 12). A fee for an occasional licence is fixed at a dollar, together with a further dollar for each day in respect of which the occasional licence is granted (s. 15 and the 3rd Sch.). A person who is convicted of an offence under the Act may be disqualified by the court from holding a licence (s. 17 (1)). All licence fees payable to the Treasurer are to be paid into Consolidated Revenue (s. 18).

To decide whether these imposts are duties of excise and so beyond the legislative competence of the State it is necessary to answer four questions some of which are of considerable constitutional importance. The first is whether a tax imposed on the consumption of goods is a duty of excise. The second, which arises if the first question is answered in the negative, is whether the practical or economic effect of the legislation, rather than the criterion of liability under the statute imposing the tax, determines whether or not the tax is a duty of excise. The third question is whether a licence fee in respect of a business, calculated on the value of goods bought or sold in a previous year, is a duty of excise. Fourthly, it must be considered whether a licence fee changes its character, and becomes a duty of excise, if the only, or the main, object of the licensing system is the collection of the fee, or if the licence adds no value to the business or premises in respect of which it is held. If any of these questions is answered in the affirmative it may be necessary to consider also whether a tax which falls equally on goods manufactured or produced outside Australia and on goods which originated in Australia can be a duty of excise.

The question whether a duty imposed on the consumption of goods is a duty of excise has never been the subject of any direct decision by this Court. If the view taken in Peterswald v. Bartley [1] had prevailed it would have been clear that a duty imposed on consumption was not an excise. In that case Griffith C.J. said that "the fundamental conception of the term is that of a tax on articles produced or manufactured in a country" [2] and that the word "excise" in s. 90 "is intended to mean a duty analogous to a customs duty imposed upon goods either in relation to quantity or value when produced or manufactured, and not in the sense of a direct tax or personal tax" [3] . Although it has never been questioned that the Court in that case was right in rejecting the argument that the phrase "duties of excise" in s. 90 is wide enough to include all the heterogeneous levies that in England were called "duties of excise" because they happened to be collected by the Board of Excise, the description of "excise" given by Griffith C.J. in Peterswald v. Bartley [1] has been expanded, or perhaps eroded, by later decisions.

1. (1904) 1 C.L.R. 497. 2. (1904) 1 C.L.R., at p. 508. 3. (1904) 1 C.L.R., at p. 509. 4. (1904) 1 C.L.R. 497.

It is unnecessary to discuss in detail the authorities which led to an enlarged conception of the meaning of the term "duties of excise", but it would seem, upon analysis, that there were three different lines of thought which led to the conclusion that was finally reached by the majority of the Court in Parton v. Milk Board (Vict.) [2] , that the description of "excise duties" given in Peterswald v. Bartley [1] was too narrow and that a tax imposed on the distribution of a commodity by a person who was not its producer or manufacturer could be an excise. First there was the theory, suggested by Higgins J. in The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia [3] , adopted by Latham C.J. in his dissenting judgment in Matthews v. Chicory Marketing Board (Vict.) [4] , and expressed by Rich and Williams JJ. in Parton v. Milk Board (Vict.) [5] in the following words:

"It" [a duty of excise] "must be imposed so as to be a method of taxing the production or manufacture of goods but the production or manufacture of an article will be taxed whenever a tax is imposed in respect of some dealing with the article by way of sale or distribution at any stage of its existence, provided that it is expected and intended that the taxpayer will not bear the ultimate incidence of the tax himself but will indemnify himself by passing it on to the purchaser or consumer." If a tax on the sale of goods can be regarded as a method of taxing their production or manufacture, it is difficult to see why a tax on their consumption should not be similarly regarded, and had it not been for the qualification, then supported by authority but more doubtful in the light of later discussion, that the tax would not be an excise unless it was expected or intended that the burden would be passed on to the purchaser or consumer, i.e. unless it was an indirect tax, this statement could have been regarded as leading logically to the conclusion that a tax on consumption is an excise. As it was, their Honours referred with apparent approval to the words of Higgins J. in The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia [3] : "it matters not whether the duty is imposed at the moment of actual sale or not, or sale and delivery, or consumption". 1. (1949) 80 C.L.R. 229. 2. (1904) 1 C.L.R. 497. 3. (1926) 38 C.L.R., at p. 435. 4. (1938) 60 C.L.R., at p. 277. 5. (1949) 80 C.L.R., at p. 252. 6. (1926) 38 C.L.R., at p. 435.

A second reason that supported the decision in Parton v. Milk Board (Vict.) [2] was that the conjunction of the references to duties of customs and duties of excise in a number of sections of the Constitution - ss. 55, 86, 87, 90 and 93 - and a consideration of the purposes for which s. 90 was framed, led to the conclusion that "it was intended to give the Parliament a real control of the taxation of commodities and to ensure that the execution of whatever policy it adopted should not be hampered or defeated by State action": per Dixon J., in Parton v. Milk Board (Vict.) [1] . Similar views as to the purpose of s. 90 have been expressed in other cases: The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia, per Rich J. [2] ; Parton v. Milk Board (Vict.), per McTiernan J. [3] ; Whitehouse v. Queensland, per Dixon C.J. [4] ; Western Australia v. Chamberlain Industries Pty. Ltd., per Barwick C.J. [5] . In Parton v. Milk Board (Vict.), Dixon J. went on to say [1] :

A tax upon a commodity at any point in the course of distribution before it reaches the consumer produces the same effect as a tax upon its manufacture or production. If the exclusive power of the Commonwealth with respect to excise did not go past manufacture and production it would with respect to many commodities have only a formal significance. However, if it is permissible to consider the economic effect of the tax, it is impossible, in my opinion, to draw a line between the last retail sale and the act of consumption. A tax on consumption might produce exactly the same economic effect on production and manufacture as would a tax on the last retail sale. The power of the Commonwealth Parliament to tax commodities would be incomplete, and its fiscal policies possibly liable to some frustration, if the power did not extend to taxes on consumption. 1. (1949) 80 C.L.R. 229. 2. (1949) 80 C.L.R., at p. 260. 3. (1926) 38 C.L.R., at p. 437. 4. (1949) 80 C.L.R., at pp. 264-265. 5. (1960) 104 C.L.R., at p. 618. 6. (1970) 121 C.L.R., at p. 17. 7. (1949) 80 C.L.R., at p. 260.

A third reason for departing from Peterswald v. Bartley [6] was that usage suggested that the expression "duties of excise" could not be confined to taxes on production and manufacture. In the course of the discussion by Dixon J., in Matthews v. Chicory Marketing Board (Vict.) [7] of the history of the use of the word "excise", reference is made [8] to a passage in Blackstone's Commentaries in which that learned author treated an imposition paid upon the consumption of a commodity as an excise duty. After referring to the doubts raised by the history of the word as to its meaning in s. 90, Sir Owen went on to refer to dicta in the judgments of Isaacs J. and Higgins J. inThe Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia [1] , to the effect that the tax must be connected with production, and said [2] :

But I think that it should not be overlooked that so far there is no direct decision inconsistent with the view that a tax on commodities may be an excise although it is levied not upon or in connection with production, manufacture or treatment of goods or the preparation of goods for sale or for consumption, but upon sale, use or consumption and is imposed independently of the place of production. I consider that the statement that there is no direct decision of this question is still true. His Honour then expressed his own opinion as follows [3] : To be an excise the tax must be levied "upon goods", but those apparently simple words permit of much flexibility in application. The tax must bear a close relation to the production or manufacture, the sale or the consumption of goods and must be of such a nature as to affect them as the subjects of manufacture or production or as articles of commerce. But if the substantial effect is to impose a levy in respect of the commodity the fact that the basis of assessment is not strictly that of quantity or value will not prevent the tax falling within the description, duties of excise. After this judgment had been written the Judicial Committee, in Atlantic Smoke Shops Ltd. v. Conlon [4] , was called on to consider the validity of a statute of New Brunswick which provided that a tax of ten per cent of the retail price should be paid at the time of making the purchase by anyone who bought tobacco for his own consumption (or for the consumption of other persons at his expense) from a retail vendor in the province. It was argued that the tax was an alteration of the excise laws of New Brunswick and was invalidated by s. 122 of the British North America Act, which provided: "The customs and excise laws of each province shall, subject to the provisions of this Act, continue in force until altered by the Parliament of Canada." Their Lordships held that the tax was valid as constituting "direct taxation within the province" within s. 92 (2) of the British North America Act even if it might be described as an excise tax. However, in the course of discussion their Lordships said [5] : "Excise" is a word of vague and somewhat ambiguous meaning. Dr. Johnson's famous definition in his dictionary is distinguished by acerbity rather than precision. The word is usually (though by no means always) employed to indicate a duty imposed on home-manufactured articles in the course of manufacture before they reach the consumer. So regarded, an excise duty is plainly indirect. In deference to this dictum Dixon J. modified his view that a tax on consumption might be a duty of excise. In Parton v. Milk Board (Vict.) [1] , he referred to his judgment in Matthews v. Chicory Marketing Board (Vict.) [2] and said: "It is probably a safe inference from Atlantic Smoke Shops Ltd. v. Conlon [3] , which has since been decided, that a tax on consumers or upon consumption cannot be an excise." He went on to say that the decision perhaps made it necessary to modify, with respect to consumption, the statement he had made in Matthews v. Chicory Marketing Board (Vict.) [4] , which I have already quoted. 1. (1904) 1 C.L.R. 497. 2. (1938) 60 C.L.R., at pp. 293-299. 3. (1938) 60 C.L.R., at pp. 295-296. 4. (1926) 38 C.L.R. 408. 5. (1938) 60 C.L.R., at p. 300. 6. (1938) 60 C.L.R., at p. 304. 7. [1943] A.C. 550. 8. [1943] A.C., at pp. 564-565. 9. (1949) 80 C.L.R., at p. 261. 10. (1938) 60 C.L.R., at pp. 287 et seq. 11. [1943] A.C. 550. 12. (1938) 60 C.L.R., at p. 300.

Since Parton v. Milk Board (Vict.) [5] no member of the Court has dissented from, and almost every member who has had occasion to discuss the matter has expressly affirmed, the proposition that a tax imposed on consumption is not a duty of excise. In Dennis Hotels Pty. Ltd. v. Victoria [6] , Dixon C.J. [7] , Kitto J. [8] , Taylor J. [9] and Menzies J. [10] all appeared to accept this view. In that case Kitto J. summed up the effect of the authorities as follows [8] :

What is insisted upon may, I think, be expressed by saying that a tax is not a duty of excise unless the criterion of liability is the taking of a step in a process of bringing goods into existence or to a consumable state, or passing them down the line which reaches from the earliest stage in production to the point of receipt by the consumer. In Bolton v. Madsen [11] , a Court of six Justices unanimously adopted this statement of principle. Expressions to a similar effect are to be found in the later cases: Anderson's Pty. Ltd. v. Victoria, per Barwick C.J. [12] ; Western Australia v. Chamberlain Industries Pty. Ltd., per Barwick C.J. [13] , per Windeyer J. [14] , and per Walsh J. [15] . It might be said that these expressions of opinion are not binding because it was not necessary to decide in any of these cases whether a tax imposed on consumption was an excise, but the very greatest weight should be given to the fact that on this issue unanimity has been reached after a fluctuation of judicial opinion. Although the expression "excise" has, as I have said, sometimes been used to include taxes on consumption, a more precise definition of the word is that given by the Encyclopaedia Britannica, 11th ed., vol. 10, and adopted by the Oxford English Dictionary: "a term now well known in public finance, signifying a duty charged on home goods, either in the process of their manufacture or before their sale to the home consumers" (see Parton v. Milk Board (Vict.) [1] ). To the same effect is the definition from the Encyclopedia of Social Sciences, cited by Windeyer J. in Dennis Hotels Pty. Ltd. v. Victoria [2] : "a tax on commodities of domestic manufacture, levied either at some stage of production or before the sale to home consumers". Once it is accepted, as it must be, that "duties of excise" for the purposes of s. 90 cannot include all the miscellaneous taxes that have been regarded in England, and in some cases arising under the Constitution of the United States, to be excises, it seems to me that established usage (notwithstanding some divagations) favours the conclusion that a tax on the consumption of goods is not a duty of excise within the meaning of that expression as used in s. 90 of the Constitution. To say that the control by the Commonwealth Parliament of the taxation of goods will not be complete, or that its fiscal policy may be hampered, if the States can impose a tax at the point of consumption, is in my opinion not decisive against this view. The question cannot be answered by having regard to the position of the Commonwealth alone. The Constitution is a federal constitution, and s. 90 is intended to effect a distribution of the power to impose taxation between the Commonwealth and the States. Of course, the section confers no power on the Commonwealth, which derives its power to impose taxation from s. 51 (ii.), but it denies power to the States. The extent of the denial must be found in the words of the section themselves rather than in economic, social or political theory. Section 90 does not refer to taxes on goods but to duties of customs and of excise. Upon its proper construction s. 90 stops short of denying power to the States to impose taxes on consumption. 1. (1949) 80 C.L.R. 229. 2. (1960) 104 C.L.R. 529. 3. (1960) 104 C.L.R., at pp. 540-541. 4. (1960) 104 C.L.R., at p. 559. 5. (1960) 104 C.L.R., at p. 573. 6. (1960) 104 C.L.R., at pp. 588-590. 7. (1960) 104 C.L.R., at p. 559. 8. (1963) 110 C.L.R., at p. 273. 9. (1964) 111 C.L.R., at pp. 364-365. 10. (1970) 121 C.L.R., at p. 13. 11. (1970) 121 C.L.R., at p. 28. 12. (1970) 121 C.L.R., at p. 35. 13. (1949) 80 C.L.R., at p. 259. 14. (1960) 104 C.L.R., at p. 601.

In reaching this conclusion I have not derived any assistance from the theory that a duty of excise would generally be an indirect tax, i.e. a tax "which is demanded from one person in the expectation and with the intention that he shall indemnify himself at the expense of another": Attorney-General (Manitoba) v. Attorney-General (Canada) [3] , cited in Browns Transport Pty. Ltd. v. Kropp [4] . One would have thought, had it not been for suggestions to the contrary in decisions given on the British North America Act, that a tax on consumption could never be an indirect tax. However that may be, I share the regret, expressed by Fullagar J. in Dennis Hotels Pty. Ltd. v. Victoria [1] , that a discussion of the difference between direct and indirect taxation, which in relation to Canada is rendered necessary by the words of s. 92 (2) of the British North America Act, should ever have been thought to be relevant or useful in relation to s. 90.

1. [1925] A.C., at p. 566. 2. (1958) 100 C.L.R., at p. 129. 3. (1960) 104 C.L.R., at pp. 553-554.

I turn now to the second of the constitutional questions which I consider to be raised by the present case. In Bolton v. Madsen [2] , the Court said: "It is now established that for constitutional purposes duties of excise are taxes directly related to goods imposed at some step in their production or distribution before they reach the hands of consumers." The Court went on to make it clear that in its opinion it is the criterion of liability that determines whether or not a tax is a duty of excise. It is not enough that the imposition produces a similar, or even the same, economic or practical effect as that which a duty of excise would have produced. The tax will only be an excise if the person taxed is, under the legislation in question, rendered liable because he has taken a step in the production or distribution of goods. In my opinion the latest decision of this Court - Western Australia v. Chamberlain Industries Pty. Ltd. [3] - provides no authority contrary to Bolton v. Madsen [2] . The three members of the Court who were in a minority in that case all accepted the view that the criterion of liability determines whether the tax is an excise (see per McTiernan J. [4] , per Kitto J. [5] and per Walsh J. [6] ) and one member of the majority, Menzies J. [7] , differed from the minority not on this ground but only because of the different view that he took of the effect of the statute in question. In my opinion the statement in Bolton v. Madsen [2] should be accepted as an authoritative expression of principle. In deciding whether a tax is a duty of excise the Court must identify the criterion of liability under the statute which imposes the tax. Of course, as Walsh J. pointed out in Western Australia v. Chamberlain Industries Pty. Ltd. [8] , it is necessary to examine the provisions of the taxing statute to determine their legal effect according to their proper construction, "whatever their form may be and whatever label may be attached by the Act to the duty which is imposed by it". However, I respectfully agree with the further statement by Walsh J. [9] :

The duty so imposed cannot be characterized as being "in reality" a duty imposed upon the act or transaction of selling goods and as, therefore, being an excise, unless it can be seen upon an examination of the provisions of the Act that it is that act or transaction which has been made the condition of the liability of the vendor to pay it. 1. (1963) 110 C.L.R., at p. 271. 2. (1970) 121 C.L.R. 1. 3. (1963) 110 C.L.R., at p. 271. 4. (1970) 121 C.L.R., at p. 18. 5. (1970) 121 C.L.R., at p. 20. 6. (1970) 121 C.L.R., at pp. 35-38. 7. (1970) 121 C.L.R., at p. 25. 8. (1963) 110 C.L.R., at p. 271. 9. (1970) 121 C.L.R., at p. 37. 10. (1970) 121 C.L.R., at pp. 37-38.

It is now possible to consider the validity of the tax imposed by Pt II of the Act. The label given to it - "Tax on the consumption of tobacco" - is not of importance. However, in my opinion Pt II on its proper construction does impose a tax which is correctly described by that label, that is, a tax on consumption. It is true that the retailer can only lawfully carry on business if he makes arrangements to collect the tax and that for practical reasons a purchaser is likely to pay the tax to the retailer or his agent at the time when he buys his tobacco. However, the purchaser is not bound to make payment until he has in fact consumed the tobacco and the retailer is not liable for any tax which he does not collect. It is, in my opinion, impossible to say that Pt II, when properly construed, imposes a tax on the last retail sale of tobacco. It is immaterial, if in fact it is true, that the tax has substantially the same practical effect as a tax imposed on the last retail sale. The criterion of liability is consumption. The tax is not an excise.

I now turn to the validity of Pt III of the Act. There are to be found in the authorities statements which, taken out of context, might suggest that a fee paid for a licence to carry on a business is not a duty of excise. Thus in Matthews v. Chicory Marketing Board (Vict.) [1] , Dixon J. said: "A tax imposed upon a person filling a particular description or engaged in a given pursuit does not amount to an excise." However, to say that a licence fee is "a tax on the carrier because he carries goods by motor vehicle" (Hughes and Vale Pty. Ltd. v. New South Wales [2] ) or "a fee payable as a condition of a right to carry on a business" (Browns Transport Pty. Ltd. v. Kropp [3] ) or a fee "payable by the licensed victualler for the right which his licence confers upon him" (Dennis Hotels Pty. Ltd. v. Victoria [4] ) may be perfectly true but in my opinion it does not in itself provide an answer to the question whether the fee is a duty of excise. The critical question is whether the fee (assuming it to be a tax) is a tax directly related to goods. Although in the leading case of Dennis Hotels Pty. Ltd. v. Victoria [5] there was a difference of opinion as to the result, all the members of the Court in my opinion recognized that a licence fee payable for the right to carry on a business might nevertheless be a duty of excise if it was a tax imposed upon goods, or, in other words, that a licence might be obtainable only on payment of a duty of excise: see per Dixon C.J. [1] ; per McTiernan J. [2] ; per Fullagar J. [3] ; per Kitto J. [4] ; per Taylor J. [5] ; per Menzies J. [6] ; per Windeyer J. [7] . Fullagar J. differed from the other members of the Court in thinking that Peterswald v. Bartley [8] correctly decided that a tax would only be a duty of excise if the taxpayer is taxed by reason of, and by reference to, his production or manufacture of the goods [9] - a view that is understandable but no longer tenable - whereas the other members of the Court considered that the impost would be an excise if it was a tax upon the taking of a step in the process of producing or distributing goods before they reached the consumer. Taylor J. more than any other member of the Court relied on the fact that the licensing legislation was a traditional way of regulating the liquor trade and that the licence gave the holder a partial monopoly [10] . I myself would respectfully doubt the relevance of these considerations. Kitto J., who was one of the majority in that case, said [11] : "The fact which makes a licence fee not a duty of excise is not that the exaction is for the licence; it is that the exaction is only in respect of the business generally, and not in respect of any particular act done in the course of the business." In my view this statement was correct and it is significant that Dixon C.J., who was one of the dissenting Justices, expressed what is in essence the same view [12] :

The fact that the licensing of a licensed victualler and for that matter the registration of a club forms part of the method of controlling the sale of liquor, the conduct of hotels and so on appears to me quite immaterial, as does the question whether the licence in the hands of the licensee is a valuable privilege for which the payment of the tax may be regarded as part of the consideration. Section 90 is quite unconcerned with the position of the individual. It is concerned wholly with the demarcation of authority between Commonwealth and State to tax commodities. (See also per Dixon C.J. in Whitehouse v. Queensland [13] .) It must in my opinion follow that even if the licensing system is brought into existence primarily as a means of imposing a tax and even if the licence adds no value to the land or business in respect of which it is granted, the fee will still not be a duty of excise unless it is directly imposed upon or in respect of goods. 1. (1938) 60 C.L.R., at p. 300. 2. (1953) 87 C.L.R., at p. 75. 3. (1958) 100 C.L.R., at p. 130. 4. (1960) 104 C.L.R., at p. 575. 5. (1960) 104 C.L.R. 529. 6. (1960) 104 C.L.R., at pp. 539-540. 7. (1960) 104 C.L.R., at p. 549. 8. (1960) 104 C.L.R., at p. 550. 9. (1960) 104 C.L.R., at pp. 559-560. 10. (1960) 104 C.L.R., at p. 576. 11. (1960) 104 C.L.R., at p. 591. 12. (1960) 104 C.L.R., at pp. 601-602. 13. (1904) 1 C.L.R. 497. 14. (1960) 104 C.L.R., at p. 555. 15. (1960) 104 C.L.R., at pp. 569, 576-577. 16. (1960) 104 C.L.R., at p. 563. 17. (1960) 104 C.L.R., at p. 547. 18. (1960) 104 C.L.R., at p. 618.

The essential question in the present case, therefore, is not whether the licence adds to the value of the business or whether the only object of the licensing system is to collect a tax but whether the tax answers the test now laid down by Bolton v. Madsen [1] as decisive - is it a tax directly related to goods imposed at some stage in their production or distribution before they reach the hands of the consumer?

Dennis Hotels Pty. Ltd. v. Victoria [2] is authority for the proposition that legislation which provides for the grant of a licence to sell goods, on payment of a licence fee, the quantum of which is based on the value of the goods purchased for the premises in a previous year, does not impose a tax directly related to the goods. The majority of the Court held that under such legislation no purchase in the earlier year and no sale during the currency of the licence attracts a liability to tax. It was submitted that the decision should not be regarded as a binding authority because the reasons of Fullagar J. cannot be regarded as fully acceptable and the other members of the Court were equally divided in opinion. This, in my view, is an incorrect approach to the doctrine of precedent. The case is authority for what was decided, namely, that a licence fee quantified by reference to the amount paid or payable for goods purchased during a period preceding that in respect of which the licence was granted was not a duty of excise. The same result would clearly follow if the quantification were by reference to the amount obtained from the sale of goods during a preceding period. No doubt these questions, if undecided, would be very arguable but that is no ground for re-opening the decision. The close division of opinion in that case was not on any question of constitutional principle but on the application of the principles to a particular form of licence fee. The decision having been pronounced by a majority of a Full Bench of the Court, after full consideration, should be regarded as settling the question. In any case the later authorities cast no doubt upon its correctness.

It remains to apply these principles to the licensing provisions of Pt III of the Act. I am prepared to assume, notwithstanding the fact that the Minister has power to have regard to the public welfare in deciding whether to grant a licence, that the only, or at least the main, function of the licensing provisions is to enable the tax to be collected. I shall also assume, perhaps with a little more hesitation, that a licensing system of this kind is not a traditional way of controlling the tobacco trade and that the possession of a licence adds no value to the premises or the business of the licensee. These facts are in my opinion irrelevant. The question is whether the fees are taxes directly related to goods. It is not in dispute that they are taxes. The fee for an occasional licence, being a fixed sum having no relation whatever to the goods sold under the licence, is very clearly not an excise. The fee for an ordinary retailer's licence will also be a fixed sum if the monthly stock value - i.e. the average value of the tobacco handled in a month over the relevant assessment period - does not exceed $500 but where the monthly stock value exceeds that amount the fee payable does bear a proportionate relationship to the monthly stock value, although the position is rather more complicated where the monthly stock value is between $500 and $600. However, it is sufficient to concentrate on the case in which the monthly stock value does exceed $600, for if the plaintiff fails in relation to that, its arguments in relation to the case where the monthly stock value is of a lesser amount would have no prospect of success. The word "handled" in s. 11 (3) of the Act is somewhat ambiguous but it must, I think, mean passing through the licensee's hands in the course of his business. However, it is immaterial whether the monthly stock value is assessed by reference to tobacco coming into the business or by reference to tobacco turned over, i.e. bought and sold. In either case the monthly stock value is the monthly average over a period of twelve months ending six months before the period in respect of which the licence is granted. If no business was carried on during the previous period the Treasurer has a wide discretionary power to fix the amount of the monthly stock value. The reasoning for which Dennis Hotels Pty. Ltd. v. Victoria [1] is authority leads to the conclusion that the fee is not a tax on any purchase or sale of tobacco. The licence fee is fixed when the licence is granted and although there is a right to a proportionate refund if business is not carried on for the whole period, the fee does not increase or abate if tobacco handled under the licence proves to be more or less than it was during the relevant assessment period. There is no necessary relation between the fee and the amount of the sales made during the currency of the licence. No handling of tobacco before or during the currency of the licence creates a liability to the tax. The person liable to pay the fee in respect of the grant of a licence may have handled no tobacco in the past, and a person who handles tobacco may not subsequently apply for a licence. In the case of a vending machine licence the fee paid is fixed primarily by reference to the capacity of the machine irrespective of the extent to which the actual sales fall below the maximum capacity. However, the licensee can elect to pay a fee proportioned to the monthly stock value and what has already been said in relation to an ordinary retailer's licence is completely applicable to that situation. None of the licence fees in my opinion can be said to be imposed upon, or in relation to, any dealing in goods. Therefore none of the fees is an excise.

It remains to add that the Act applies to all tobacco whether manufactured or produced within or outside Australia, but having regard to the conclusion I have reached it is unnecessary to decide upon the correctness of the statement that "an inland tax upon goods of a class manufactured in Australia and abroad, imposed without regard to their place of origin, is an excise" (Dennis Hotels Pty. Ltd. v. Victoria [1] ). It should not be taken from this observation that I intend to cast doubt on that proposition; I express no view upon it.

For the reasons I have given, I hold that the Act was within the competence of the Legislature of the State of Tasmania. I would allow the demurrer to the whole of the statement of claim.

The present challenge to the constitutional validity of the Tobacco Act 1972 Tas. raises two distinct problems, each concerned with what is said to be an intrusion by this legislation into the field from which the taxing powers of the States are excluded by s. 90 of the Constitution. By that section the power of the Parliament of the Commonwealth to impose duties of excise is made exclusive and the question is whether two imposts enacted by this legislation, the one described as a tax upon the consumption of tobacco and the other as a licence fee payable by retail tobacconists, are in truth duties of excise, a form of taxation denied the States.

The Tobacco Act consists of four parts of which Pt II, containing sections 3 to 8, is headed "Tax on the consumption of tobacco". Section 3 (1) of that part imposes a tax "on the consumption of tobacco" the amount of which is, by sub-s. (2) of that section, declared to be seven and a half per cent of its value; by sub-s. (3) unpaid tax may be recovered as a debt due to the Crown and failure to pay tax within seven days of consumption is an offence under sub-s. (4). Sub-section (5) then provides for a refund of tax in the case of tobacco on which tax has been paid before consumption but which is not subsequently consumed. Section 4 affords exemption for the consumption of tobacco brought into the State by travellers and s. 5 exempts from tax the consumption of tobacco for scientific and like purposes. By s. 6 the taxable value of tobacco is taken to be its retail sale price.

The last two sections of the part, ss. 7 and 8, are concerned with collection and payment of the tax; s. 7 confers wide regulation-making power to provide for any convenient method for the collection of the tax, including power to make arrangements with any persons with respect to the collection of the tax and to prohibit the carrying on of a retail tobacco business unless "arrangements made under the regulations are in force in respect of that business or the premises on which it is carried on". Section 8 requires tax proceeds to be paid by the Commissioner into the consolidated revenue of the State.

These provisions, supplemented by the miscellaneous and supplementary provisions of Pt IV of the Act and by s. 2 of the Act, which defines "tobacco" and gives to the phrase "the consumption of tobacco" the meaning of "the smoking or chewing of tobacco by any person", make up that part of this taxing measure which is described in the long title to the Act as "the imposition of a tax on the consumption of tobacco". Part III of the Act, comprising eleven sections, is concerned with the distinct topic of the licensing of retailers of tobacco; it provides for a licence fee which, like the tax on consumption, is challenged as being a duty of excise and for the moment I will defer consideration of its effect.

If, on its true construction, the tax imposed in Pt II of the Act is a tax only upon the consumption of tobacco and not upon its purchase by the consumer or its sale by the retailer I do not regard it as within the field of exclusive Commonwealth taxing power, described in s. 90 as encompassing duties of customs and of excise.

The first judicial pronouncement upon the subject, in Peterswald v. Bartley [1] , gave to the phrase "duties of excise", or rather to "the Australian use of the term", a special meaning when found in our Constitution "framed in Australia by Australians and for the use of the Australian people" - per Griffith C.J. [2] . In the course of time and with the passage through the Court of a great variety of challenged State legislation the meaning of the phrase in its context in the Constitution developed and expanded until a point was reached, in Bolton v. Madsen [3] , when it was possible for the Court, in a joint judgment in which six members participated, to declare [4] that:

It is now established that for constitutional purposes duties of excise are taxes directly related to goods imposed at some step in their production or distribution before they reach the hands of consumers. Since Bolton v. Madsen [1] this meaning has not been departed from in any relevant respect and the subsequent judgments of this Court have reflected the view that what is for constitutional purposes a duty of excise stops short of a tax imposed upon the act of consumption. It is to taxes imposed at any stage along what may be described as a line reaching from the earliest stage in production to the point of receipt by the consumer that duties of excise have now come to be confined; so Barwick C.J. said in Anderson's Pty. Ltd. v. Victoria [2] , "the step which puts the goods into consumption is still in the line, albeit at the end of the line". 1. (1904) 1 C.L.R. 497. 2. (1904) 1 C.L.R., at p. 509. 3. (1963) 110 C.L.R. 264. 4. (1963) 110 C.L.R., at p. 271. 5. (1963) 110 C.L.R. 264. 6. (1964) 111 C.L.R., at p. 365.

No absolute is to be discovered in a search for the meaning of "duty of excise"; no ultimate truth lies concealed in the phrase "duty of excise", there awaiting recognition by the judicial fossicker; the word excise "has never possessed, whether in popular, political or economic usage, any certain connotation and has never received any exact application" - per Dixon J. in Matthews v. Chicory Marketing Board (Vict.) [3] . The degree of certainty which has been conferred upon the phrase, at least in relation to that point on the journey of goods from producer to consumer beyond which a tax is no longer viewed as an excise, has been hard won and should not lightly be disturbed in this important aspect of constitutional law concerned with the delineation of the boundary between State and federal legislative competence in the taxation of the citizen.

No convincing reasons have, in my view, been advanced before us for the adoption now of any new meaning of the phrase "duty of excise" so as to include a tax on consumption. That the economic effect of such a tax is, like that of acknowledged duties of excise, reflected back upon the manufacturer or producer is no doubt true; however this affords no demonstration that such a tax is a duty of excise. This economic effect cannot constitute any conclusive determinant of the character of a tax as an excise, indeed counsel for the plaintiff did not ultimately urge that all consumption taxes, though possessing this feature, should be regarded as duties of excise.

A consumption tax is a direct, not an indirect, tax: Atlantic Smoke Shops Ltd. v. Conlon [4] . It is of a kind which Griffith C.J. described in Peterswald v. Bartley [5] as "a direct tax or personal tax". Whatever may now be thought to be the relevance, for the purposes of s. 90, of this distinction between direct and indirect taxes, it remains true that indirect taxes tend to be more concerned with the commodity and less with the particular taxpayer than are direct taxes - Attorney-General (British Columbia) v. Kingcome Navigation Co. [1] ; hence direct taxes are inherently less closely related to goods than are indirect taxes and are to that extent less likely to be found to be duties of excise, to be taxes "directly related to goods" - Bolton v. Madsen [2] . Consistently with this, Dixon J. said in Matthews v. Chicory Marketing Board (Vict.) [3] , in a passage subsequently cited by this Court in Browns Transport Pty. Ltd. v. Kropp [4] , that a tax imposed upon a person filling a particular description or engaged in a given pursuit did not amount to an excise. Moreover a tax on consumption cannot, of course, be passed on and therefore lacks that common feature of an excise and, as was pointed out in the Kingcome Navigation Co. Case [1] , in a passage cited by Dixon J. in Parton v. Milk Board (Vict.) [5] , both customs and excise duties are duties imposed in respect of commercial dealings in commodities and are, in their essence, trading taxes; a tax on consumption is of its nature not such a tax.

1. [1943] A.C., at p. 563. 2. (1904) 1 C.L.R., at p. 509. 3. [1934] A.C., at p. 59. 4. (1963) 110 C.L.R., at p. 271. 5. (1938) 60 C.L.R., at p. 300. 6. (1958) 100 C.L.R., at p. 130. 7. [1934] A.C., at p. 59. 8. (1949) 80 C.L.R., at p. 259.

In Parton v. Milk Board (Vict.) [6] Dixon J. described as an essential feature of the conception of an excise "that it should be a tax upon goods before they reach the consumer"; the significance of this feature now finds expression in that passage which I have earlier cited from the joint judgment in Bolton v. Madsen [2] and should in my view conclude the present question in favour of the respondents.

1. (1949) 80 C.L.R., at p. 260. 2. (1963) 110 C.L.R., at p. 271.

If then a tax upon the act of consumption of consumable goods is not, for constitutional purposes, itself a duty of excise, is the tax with which Pt II of the Tobacco Act is concerned a tax upon consumption?

The imposition of the tax on the act of consumption and upon no other act on the part of the taxpayer is clear enough; s. 3 (1) of the Act, when expanded by reference to s. 2, imposes the tax upon the smoking or chewing by any person of tobacco prepared for consumption. It is the person who actually consumes the tobacco who is liable for the tax - s. 3 (3) and (4), regardless of how he comes into possession of it; no liability to tax arises until consumption occurs and it then arises only in respect of the amount consumed by the act of smoking or chewing it. To purchase a packet of cigarettes or a quantity of pipe or cigarette tobacco involves no tax liability on the part of the purchaser; nor is he liable in respect of any cigarettes or tobacco which he gives to others to smoke or which he preserves from consumption or destroys otherwise than by smoking or chewing, nor is there any tax payable on the unconsumed tobacco represented by cigarette butts or pipe dottles.

All this seems clear enough; the tax, imposed by Pt II of the Act, is manifestly upon consumption only although it may appear to be a tax difficult to collect, easy to evade and inordinately troublesome to pay. It was no doubt those very features that explain the contents of Pt II of the Tobacco Regulations 1972. While they contemplate that tax may be paid by the consumer to the Commissioner after consumption, in which case full details of the act of consumption must accompany the payment: reg. 2 (2) and (3), they also provide, in reg. 2 (1), for payment of tax to collectors or other authorized persons and by reg. 4 provision is made for the making of arrangements with retail tobacconists for the collection of the tax by them at the time of sale and they are required to enter into such arrangements as a condition of carrying on their businesses. Regulation 17 requires an intending consumer of tobacco to notify the Commissioner in writing when he obtains possession of any tobacco upon which tax has not already been paid.

Thus a smoker, should he appreciate that this tax is imposed upon the act of consumption and accordingly determine not to avail himself of the opportunity of paying tax, in advance of consumption, to the retail tobacconist from whom he buys it, finds himself burdened with at least two obligations under the regulations; he must supply to the Commissioner written particulars both when he gets possession of the tobacco and again when he consumes it and if he disposes of it otherwise than by consumption he must also notify the Commissioner. In any event he must pay the tax when he consumes the tobacco.

The obligation to comply with these requirements in the case of tobacco on which tax has not been paid in advance at the time of its purchase no doubt provides a strong incentive to pay the tax to retail tobacconists when supplies are bought, thus avoiding all need for the making of written returns to the Commissioner. It was urged that in truth the legislative plan, viewed as a whole and consisting both of the Act and of the Regulations, disclosed that this was not a tax upon consumption but upon the transaction of sale and purchase whereby the consumer acquired the tobacco from the retailer.

Such a submission is only tenable, if at all, because of the form taken by the Regulations. There is, in my view, nothing in the Act which would justify its characterization as anything other than a tax upon consumption. If the regulations do themselves operate as to impose a duty of excise the position will resemble that referred to by Latham C.J. in Parton v. Milk Board (Vict.) [1] and the Act "should not be construed as purporting to authorize an unlawful regulation. Unlawful action under a statute which is not unlawful in its own terms does not invalidate the statute." Only the regulations in the form they take would then be ultra vires the regulation-making power in s. 7 of the Act, the Act itself would stand unaffected.

However there is, I think, nothing in the form which the regulations take which involves them in an attempted imposition of an excise. The attack upon them is, essentially, that, by discouraging smokers from deferring payment of tax until after consumption and by offering a far more convenient alternative mode of payment at the time of the retail purchase, they ensure that tax will in fact be paid on purchase and seldom, if ever, on consumption; this, it is said, gives to the tax the character of a tax upon goods at "the point of receipt by the consumer" (per Barwick C.J. in Western Australia v. Chamberlain Industries Pty. Ltd. [2] ), and renders the tax an excise.

This is a contention analogous to that which, in the light of the particular legislation there in question, succeeded in Attorney-General (N.S.W.) v. Homebush Flour Mills Ltd. [3] , but the foundation for it disappears when the form taken by the present regulations is examined. There is here no harsh sanction imposed so as to deter adoption of that course not desired by the legislature, but which alone it may lawfully require to be followed, and so as to ensure instead that the taxpayer will adopt the alternative course, desired by the legislature but which it is forbidden to enforce upon the taxpayer. Instead the very considerable inconveniences attendant upon payment of tax after consumption arise naturally from the inherent nature of such a tax when imposed upon consumables such as tobacco or, for that matter, food or drink.

There is nothing which can be seen on its face to be artificially and purposely onerous in the requirements which govern payment of this tax after consumption. A consumption tax falling upon the consumer of a relatively cheap substance like tobacco, which, particularly in the form of cigarettes, is traditionally the subject of frequent gifts by the retail purchaser of individual cigarettes to friends and acquaintances and which is consumed in small portions at frequent intervals, is necessarily a most irksome imposition. The reasonable enough requirement that the Commissioner be furnished with full particulars of any quantity of tobacco when it first comes into the prospective consumer's hands and, again, when he consumes it or disposes of it and the not unreasonable insistence upon payment of tax weekly, that is within seven days of the date of consumption, are not, in themselves, other than what the efficient administration of any legislation imposing a tax upon consumption might be thought sensibly to call for. It is only the nature of the goods the consumption of which is here taxed which makes the regulations so potentially inconvenient in their operation. A tax payable, say, on first use by a consumer of relatively durable consumer goods after their purchase from the retailer might well, for its effective collection, be thought to require the supply of similar information to the tax collecting authority as do the Tobacco Regulations but would not of course present the same difficulties for the taxpayer.

If, then, the provisions of the regulations associated with the deferment of payment of tax until after consumption are not such as may be seen to be contrived especially as a deterrent against deferment of payment I see no reason for regarding the taxing measure viewed as a whole, with its concept of payment after consumption, as other than what it purports to be, the imposition of a consumption tax. The existence of those regulations which offer an alternative and more convenient mode of payment in cases where the tobacco consumed was originally purchased in Tasmania, but which leave unaltered the nature of the act, consumption, on which tax is payable and provide for application for a refund of tax if no consumption eventuates, provides no ground for regarding them as ultra vires as involving any duty of excise. The provision of a more convenient way of paying and collecting the tax cannot, in my view, result either in the imposition of a tax bearing a different character from that which the terms of the Act imposing it gives it or in the conversion of an originally valid tax into an invalid duty of excise.

I accordingly conclude that neither Pt II of the Act nor the regulations relating to its provisions involve any duty of excise.

The provisions of Pt III of the Act deal with what the long title to the Act describes as "the licensing of retail traders in tobacco". The terms of Pt III appear sufficiently from other judgments. The licence fees which it provides for will be a duty of excise if they are a tax upon goods imposed at some stage in their movement from production into consumption. That Pt III imposes a tax is clear enough; but is that tax imposed upon goods in the relevant sense?

It is not, I think, a question of choosing between two possible characterizations of the tax, as licence fee or as duty of excise; there are no special properties of licence fees which render them immune from characterization as duties of excise. In the Dennis Hotels Case [1] Kitto J. observed that even an exaction in the nature of a quid pro quo for a statutory licence to carry on a business might take the form of an excise duty and Fullagar J. said [2] , that a licence required in the first place alio intuitu might be made obtainable only on payment of what was found to be a duty of excise; like views were expressed by other members of the Court.

1. (1960) 104 C.L.R., at p. 563. 2. (1960) 104 C.L.R., at p. 550.

Instead of the making of such a choice, the task is to determine whether the present tax, here imposed after production and before consumption, is one directly related to goods in the sense that what renders the taxpayer liable to the tax is "the taking of a step in a process of" passing goods "down the line which reaches from the earliest stage in production to the point of receipt by the consumer": per Kitto J. in the Dennis Hotels Case [3] , approved by the Court in Bolton v. Madsen [4] .

1. (1960) 104 C.L.R., at p. 559. 2. (1963) 110 C.L.R., at p. 273.

If the step which renders a retail tobacconist liable to the tax is either the purchase of his supplies from the wholesaler or their subsequent sale by retail to customers it will be a duty of excise even if it takes the form of a fee for a licence to carry on the business of tobacco retailer.

Perhaps the clearest way in which a tax may be seen to fall upon the taking of such a step in the process of distribution is when it is calculated by reference to the quantity or value of purchases or sales of goods by the taxpayer. This method of calculation is not an essential feature of a duty of excise but its adoption provides a significant indication that the tax is an excise because it tends to demonstrate that what is being taxed is the step of dealing in particular goods. The very act of measuring the amount of tax by reference to the number, weight, volume or value of the goods dealt in will usually be explicable only as disclosing that what is being taxed is the taxpayer's dealing with those goods. Only exceptionally, in an appropriate context, will it perhaps indicate no more than that the value of a franchise, monopoly or business is being measured, the tax being a fee on grant of that franchise or monopoly or a tax on that business rather than an excise.

In Pt III of the Act, however, the tax is not in fact measured in this way. The basis for measurement of the fee is "the monthly stock value for those premises for the relevant assessment period", s. 11 (2); that is, the retail value of tobacco handled in a month in the course of the retail tobacco business carried on in the relevant premises averaged over the period of twelve months ending six months before the commencement of the period of the annual licence, s. 11 (3) and (4).

Whatever may be the precise meaning of "handled", in s. 11 (3), it is clear that current dealings in tobacco play no part in determining the amount of licence fee and, quite apart from authority, I would not regard this measure of the fee as demonstrating that what is being taxed is the taking of a step in dealing with particular quantities of tobacco, rather the contrary. When the calculated monthly stock value is less than $500 a fixed fee is payable by the tobacconist, quite unrelated to any dealings in tobacco, past or present. Only when a larger trade than this is done in tobacco, with sales volume in excess of almost $17 per day, on a seven days a week trading basis, does the fee bear some relationship to the monthly stock value. Even then the effect of this method of computation of the licence fee is only to ensure that its amount cannot bear other than a coincidental relationship to the goods dealt in during the period in respect of which the licence is current, that coincidence arising only if the amount of tobacco handled during the licence period happens to be the same, or of the same total retail value, as was handled during the earlier period used for purposes of computation of the monthly stock value.

It may be observed in passing that it would seem seldom to be convenient, in the administration of an Act imposing annual licence fees, to measure the amount of fee by current dealings in goods; that fee will usually be payable on issue of the licence or at least before the end of the relevant year and, unless resort is had to a relatively complex system involving pre-payment of licence fees on an estimated basis subject to ultimate adjustment when the actual quantity or value of dealings during the year of licence is known, some other measure of the fee will have to be adopted.

The view which I take of the significance of the basis upon which licence fees are to be calculated under Pt III of the Act is supported by the authority of the Dennis Hotels Case [1] , a decision the authority of which has been fully acknowledged in subsequent cases in this Court. In this regard I would adopt what is said in the reasons for judgment of Menzies J., which I have had the advantage of reading.

If the basis upon which fees in the present case are to be calculated does not of itself suggest the taking of a step in the distribution of the goods, there is, I think, no other sufficient indication in the legislation that this is an excise. The provisions of s. 11 (6), which give to the Treasurer a wide discretionary power to fix the amount of a monthly stock value in certain instances, is equivocal and the remaining provisions of Pt III, so far as they throw any light on the matter, point rather in a contrary direction.

Accordingly I conclude that Pt III of the Act does not involve the imposition of a duty of excise in the shape of the licence fee which it prescribes.

No doubt the legislation as a whole has been framed with the pitfalls of s. 90 of the Constitution clearly in view and is designed to produce revenue from forms of taxation which are in some respects related to duties of excise although, as I have concluded, not actually encroaching upon that forbidden field. That this should be so is no more than the inevitable outcome of the reservation to the Commonwealth of particular fields of taxation and of their definition by descriptions such as those provided by s. 90 of the Constitution. While careful examination of such legislation is called for when it is challenged it is not, I think, to be approached upon any more critical basis than that; the States may validly impose taxation so long as it does not answer the description of a customs duty or a duty of excise as this Court has construed those expressions and, once satisfied that the tax which the legislation imposes and to which it gives its particular character is neither, the validity of the tax is no longer in doubt.

I would allow the demurrer to the whole of the statement of claim.

Are the taxes imposed by Pt II and the licence fees prescribed by Pt III of the Tobacco Act, 1972 Tas. properly to be characterized as duties of excise within the meaning of s. 90 of the Constitution? That is the issue for determination. Its resolution requires, first, a consideration of the content of the expression "duties of excise" and, secondly, an examination of the provisions of the Tasmanian statute.

In Peterswald v. Bartley [1] , the Court was called upon to decide whether an excise meant a tax on the production or manufacture of goods or whether it should be given the more expanded meaning which it had acquired under English statutes, that is, "almost all kinds of inland revenue imposts". The Court rejected the wider meaning in favour of the view that an excise is a duty "imposed upon goods either in relation to quantity or value when produced or manufactured". In coming to that conclusion it was influenced by the doctrine of implied prohibitions, the restricted notion of excise duties according to popular understanding in the Australian colonies at the time of Federation and the reference in s. 93 to excise duties "paid on goods produced or manufactured in a State".

The foundations for the conclusion then reached eroded with the passage of time. The doctrine of implied prohibitions was discarded and the restricted notion of excise popular in the colonies at the end of the nineteenth century was replaced by an acceptance of a wider concept of excise derived in part from English and United States sources (The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia [1] ). In place of the doctrine of implied prohibitions and the emphasis which it gave to the language of s. 93 there came an appreciation of the constitutional significance of the denial to the States of legislative power with respect to duties of customs and excise duties. In Parton v. Milk Board (Vict.), Dixon J. (as he then was) said [2] :

In making the power of the Parliament of the Commonwealth to impose duties of customs and of excise exclusive it may be assumed that it was intended to give the Parliament a real control of the taxation of commodities and to ensure that the execution of whatever policy it adopted should not be hampered or defeated by State action. A tax upon a commodity at any point in the course of distribution before it reaches the consumer produces the same effect as a tax upon its manufacture or production. If the exclusive power of the Commonwealth with respect to excise did not go past manufacture and production it would with respect to many commodities have only a formal significance. McTiernan J. said [3] that "the object of the section is a uniform fiscal policy for the Commonwealth". 1. (1926) 38 C.L.R., at pp. 434-435. 2. (1949) 80 C.L.R., at p. 260. 3. (1949) 80 C.L.R., at p. 265.

In the light of these developments, inevitably as it may seem, the Court has accepted that the concept of an excise extends to a tax on the sale of goods, levied on a person who is not the producer or manufacturer, at least when the tax is "directly related to goods imposed at some step in their production or distribution before they reach the hands of consumers" (Bolton v. Madsen [4] ).

If the absence of a power to control taxes on the sale of goods deprives the Commonwealth Parliament of a real power to control the taxation of commodities, the absence of a power to control taxes on the consumption of goods might be thought perhaps to constitute an unacceptable limitation on the power of control which it was the purpose of the section to repose in the Parliament. Yet, apart from the remarks of Dixon J. in Matthews v. The Chicory Marketing Board (Vict.) [1] , later qualified in Parton's Case [2] in the light of the observations in Atlantic Smoke Shops Ltd. v. Conlon [3] , it has not been suggested that an excise extends to a tax on consumption of goods: cf. The Commonwealth and Commonwealth Oil Refineries Ltd. v. South Australia [4] .

1. (1938) 60 C.L.R., at p. 300. 2. (1949) 80 C.L.R., at p. 261. 3. [1943] A.C., at p. 565. 4. (1926) 38 C.L.R., at p. 435.

Whatever differences may be detected in the judgment of members of this Court in recent decisions, they all agree in defining or describing an excise duty in such terms as would exclude a tax imposed on goods after they have passed into the hands of a consumer (see Bolton v. Madsen [5] ; Anderson's Pty. Ltd. v. Victoria [6] ; Western Australia v. Hamersley Iron Pty. Ltd. [No. 1] [7] ; Western Australia v. Chamberlain Industries Pty. Ltd. [8] ). These statements must, I think, be regarded as establishing at this time that a tax on consumption of goods is not an excise. The limitation which they place on the concept necessarily involves a restriction on the power of the Commonwealth to control the taxation of commodities. However, as a tax on consumption which is not also a tax on sale of goods is a phenomenon infrequently encountered, the restriction concedes to the Commonwealth a large measure of control. The justification for the restriction is evidently based on the notion that consumption is not sufficiently proximate to the production and manufacture of goods - a concept of proximity which it derives from the reference in s. 93 to "taxes paid on the production and manufacture of goods" and from the circumstance that s. 90 deals with bounties on production as well as duties of excise.

1. (1963) 110 C.L.R., at p. 271. 2. (1964) 111 C.L.R. 353. 3. (1969) 120 C.L.R. 42. 4. (1970) 121 C.L.R. 1.

As this conclusion does not by any means dispose of the tax imposed by Pt II, let alone the licence fees prescribed by Pt III, I have now to consider more closely the characteristics in virtue of which a tax, whether described as a licence fee or not, may be recognized as a tax on goods and therefore as an excise duty. Much has been said on this topic, but it is unnecessary to go beyond the more recent cases.

In Dennis Hotels Pty. Ltd. v. Victoria [9] , the licence fee prescribed by s. 19 (1) (a) of the Licensing Act 1958 Vict. was held not to impose a duty of excise and the licence fee prescribed by s. 19 (1) (b) was held to impose such a duty. The licence fee prescribed by s. 19 (1) (a) was calculated by reference to a percentage of the gross amount paid or payable for liquor purchased for the premises during a period of twelve months ending on the last day of June preceding the date of application for grant or renewal of the licence. The licence fee prescribed by s. 19 (1) (b) was calculated by reference to a fixed amount per diem whilst the licence was in force, together with a percentage of the amount paid or payable for liquor purchased under the licence.

Dennis Hotels [1] is not authority for the universal proposition that, in order to constitute an excise, a licence fee must be calculated by reference to the quantity of goods sold under the licence, thereby enabling the duty to be passed on to a purchaser and that it is not enough that the licence fee is calculated by reference to the quantity of goods sold by the licensee or on the premises before the licence commenced to operate. The decision related to fees prescribed for a licence to sell liquor by retail; it has no necessary application to fees prescribed for a licence to manufacture or process goods to which in my opinion different considerations apply.

Although I doubt whether I should have been inclined, even in the context of the Licensing Act 1958 Vict. to draw a distinction between licence fees prescribed by reference to the quantity of goods sold under the licence and those prescribed by reference to goods sold in an antecedent period, this circumstance does not warrant my declining to follow the authority of Dennis Hotels [1] in its application to licence fees of a like kind. The decision has been accepted as authoritative in later cases. The narrowness of the majority and the manner in which it was composed are not enough to warrant a reconsideration of the decision. Consequently, unless the licence fees imposed by Pt III of the Tobacco Act, 1972 Tas. can be distinguished from the licence fee prescribed by s. 19 (1) (a) of the Licensing Act 1958 Vict. its validity must be governed by the decision in Dennis Hotels [1] .

1. (1960) 104 C.L.R. 529. 2. (1960) 104 C.L.R. 529.

In Bolton v. Madsen [2] it was held that fees for permits issued under a State statute were not duties of excise. The statute prohibited the use of vehicles for the carriage of goods unless they were carried in accordance with a permit issued in respect of the vehicle. The fee was calculated at the rate of threepence per ton mile on the registered carrying capacity of the vehicle.

It is not enough that Turner, the owner-carrier, could by a simple calculation determine the cost to him per bale of carrying his wool from his station to the wool store for sale. It is not enough because it is the criterion of liability that determines whether or not a tax is a duty of excise. The tax is a duty of excise only when it is imposed directly upon goods or, to put the same thing in another way, when it directly affects goods, and to establish no more than that its imposition has increased the cost of putting goods upon the market by a calculable amount falls short of establishing the directness of relation between the tax and the goods that is the essential characteristic of a duty of excise. 1. (1963) 110 C.L.R., at p. 271.

Although this passage gives expression to what is described as an essential characteristic of an excise, it has not always been accepted that it should be regarded as a precise definition, notwithstanding its repetition by some members of the Court in the subsequent cases. In the later cases Barwick C.J. has said that the criterion of liability to tax "will not be found exclusively in the verbal formulae of the statute" (Western Australia v. Chamberlain Industries Pty. Ltd. [1] ). And it is apparent that neither Windeyer J. nor Owen J. considered the criterion of liability to tax as precluding an examination of the substance and effect of the tax thereby imposed. In these circumstances I am not bound to accept what was said in Bolton v. Madsen [2] as a precise definition of a broad expression used in the Constitution to denote taxes on goods.

1. (1970) 121 C.L.R., at p. 15. 2. (1963) 110 C.L.R., at p. 271.

I find myself in agreement with the observations of the Chief Justice in Western Australia v. Chamberlain Industries Pty. Ltd. [1] , to which I have already referred, and with his earlier observations in Anderson's Pty. Ltd. v. Victoria [3] , where he said:

in arriving at the conclusion that the tax is a tax upon the relevant step, consideration of many factors is necessary, factors which may not be present in every case and which may have different weight or emphasis in different cases. The "indirectness" of the tax, its immediate entry into the cost of the goods, the proximity of the transaction it taxes to the manufacture or production or movement of the goods into consumption, the form and content of the legislation imposing the tax - all these are included in the relevant considerations. 1. (1970) 121 C.L.R., at p. 15. 2. (1964) 111 C.L.R., at p. 365.

I turn now to the provisions of the Tobacco Act, 1972 Tas., in particular those provisions which relate to the imposition of the tax imposed by Pt II. The title to the Act describes it as "An Act for the imposition of a tax on the consumption of tobacco". This description of the tax is reinforced by s. 3 which imposes a tax of seven and a half per cent of the value "on the consumption of tobacco". Consumption of tobacco is defined as meaning the smoking or chewing of tobacco (s. 2). There is no provision in the Act which makes the tax so imposed payable at the time of the last retail sale or at a time before consumption takes place. The Act does not contain a provision fixing the time at which the tax becomes payable, although it provides that if the tax is not paid before the expiration of seven days after consumption the consumer commits an offence punishable by fine (s. 3 (4)). Tax payable in respect of consumption that has not been paid is recoverable by the Commissioner as a duty due to the Crown (s. 3 (3)). A right to a refund of tax paid on tobacco not consumed is given (s. 3 (5)).

Had these provisions stood alone I should have thought that the tax imposed by Pt II of the Act is a tax on the consumption of goods and therefore not an excise. However, it is necessary to consider s. 7 and the regulations which have been made in the exercise of the power which it confers. The section enables the making of regulations for the collection of the tax. In particular it authorizes the making of regulations prescribing the persons to whom, and the manner in which, the tax is to be paid and the appointment of collectors. The power extends to authorizing or requiring the Commissioner to make arrangements with other persons with respect to the collection of the tax and to the making of provision for the prohibition or restriction of the carrying on of a retail tobacco business unless arrangements made under the regulations are in force in respect of that business or the premises on which it is carried on.

The Tobacco Regulations 1972 made under the Tobacco Act contain a series of provisions relating to payment and collection of the tax, and the making of arrangements with retailers for collection of tax. There is a prohibition against the carrying on on any premises of a retail tobacco business unless arrangements made under the regulations are in force in respect of the business (reg. 4 (8)). The same regulation authorizes the Commissioner to make arrangements with the proprietor of the business or the occupier of premises in which a retail tobacco business is carried on for the collection of the tax payable in respect of the consumption of tobacco sold on the premises in the course of the business (reg. 4 (1)). When application is made to the Commissioner with respect to such a business, the Commissioner is required to enter into arrangements with the applicant so that a collector is appointed for the purpose of receiving sums paid by way of tax in respect of the consumption of tobacco sold by retail on the premises in the course of the business (reg. 4 (2)).

Regulation 2, which deals with the payment of tax, provides that tax shall be paid to a collector or a person authorized by him to receive payments of tax on his behalf, and that where tobacco is consumed without the tax on the consumption having been paid the tax is to be paid to the Commissioner.

It is evident then that the regulations require that arrangements be made between the Commissioner and every proprietor of a retail tobacco business or the occupier of the premises in which that business is carried on, for the appointment of a tax collector in respect of the premises whose duty it is to receive payments of tax made at the time when tobacco is sold by retail to buyers. Consequently, the tax which is imposed by the Act is levied at the time of the last retail sale at the place at which the tobacco is sold. It is levied before or at the time of delivery to the purchaser, who will in many circumstances be a person other than the ultimate consumer. The tax is therefore levied in respect of the goods before they pass into the hands of the consumer and it is calculated by reference to their value according to the retail sale price. The amount of the tax is paid directly by the purchaser.

Once the provisions of the regulations are taken into account, the effect of the tax, so it seems to me, is that it is an excise. It is a levy on the sale of goods calculated by reference to their value and imposed before they pass into the hands of the consumer in circumstances where the amount of the tax is paid by the ultimate purchaser. In accordance with what I have already said, that is sufficient to bring it within the prohibition contained in s. 90 of the Constitution.

The conclusion which I have reached is based on the scheme contained in the regulations for the collection and payment of the tax, not upon the provisions of the Act itself. Accordingly, the regulations should be regarded as falling outside the regulation-making power conferred by s. 7. That section should be interpreted in the light of the constitutional prohibition so as not to extend to a series of provisions which would have the effect of making the tax imposed by the Act an excise within the meaning of s. 90. I would overrule the demurrer so far as it relates to regs. 2 to 8 (inclusive) and declare that they are invalid.

The provisions of Pt III of the Act and the regulations made in pursuance of s. 19 have been sufficiently set forth elsewhere. It is evident that the part has been modelled on the corresponding provisions of s. 19 (1) (a) of the Licensing Act 1958 Vict. the validity of which was upheld in Dennis Hotels [1] . I am unable to discern in the Act or the regulations any provisions which would enable me to distinguish the nature and character of the licence fee prescribed by Pt III from that prescribed by s. 19 (1) (a) of the Licensing Act 1958.

Accordingly, I would allow the demurrer, except in so far as I have already indicated that it should be overruled.