Dickenson's Arcade Pty Ltd v Tasmania

Dickenson's Arcade Pty Ltd v Tasmania - [1974] HCA 9 - HCA 1974 case summary — Zoe

[10]

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.

[18]

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:

[28]

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.

[30]

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.

[33]

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] :

[36]

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] :

[40]

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.

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