Gosford Meats Pty Ltd v New South Wales - [1985] HCA 5 - HCA 1985 case summary — Zoe

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Gosford Meats Pty Ltd v New South Wales

[1985] HCA 5

High Court of Australia|1985-07-01|Before: Dawson JJ

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Court

High Court of Australia

Decision date

1985-07-01

Before

Dawson JJ

Source

Original judgment source is linked above.

Judgment (138 paragraphs)

[1]

This matter comes before the Court by way of demurrers by the defendants to a claim by the plaintiff for a declaration that s. 11C of the Meat Industry Act 1978 N.S.W. as amended ("the Act") and cl. 41 of the Meat Industry (Licensing) Regulation 1980, as amended, made under the Act are invalid because, contrary to s. 90 of the Constitution, they purport to impose taxes which are duties of excise.

[2]

According to the statement of claim, the plaintiff operates the Gosford Abattoir and associated processing and production establishments in New South Wales ("the premises") and there carries on the business of slaughtering livestock. From the carcasses, the plaintiff produces for sale dressed carcasses and sides, quarters and other parts thereof, meat, offal, pet food material, casings, skins, hides, meat meal, tallow, blood meal, gall and hair. For the purposes of its business, the plaintiff purchases livestock consisting of sheep, lambs, cattle and calves. After slaughter the carcasses are dressed unless they are considered to be unfit for human consumption. Carcasses considered unfit are either sold for pet food or are rendered down. Dressed carcasses are either sold in that form or are processed further by the plaintiff either by being broken down into sides, quarters and the like for sale as such or by being boned, sliced, cut up and packed for sale as packaged fresh meat. Edible offal removed from carcasses is further processed by the plaintiff to render it suitable either for human consumption or for pet food. Inedible offal is rendered down. The intestines and glands recovered from carcasses are saved, cleaned, treated and used at the premises to produce casings for sale to sausage makers or to manufacturers of smallgoods, tennis string and pharmaceutical products. Sheep and lamb skins removed in the dressing of carcasses are dried, treated and processed on the premises and then sold to wool and leather producers. Blood recovered on the premises is dried to produce blood meal which is sold to stock feed manufacturers. Gall is sold to pharmaceutical manufacturers. Tailhair recovered in dressing the carcasses of cattle and calves is cleaned and sold to upholsterers, while the hides and skins removed from the carcasses of cattle and calves are sold to tanneries or leather works. Meat meal and tallow are sold to stock food, soap and pharmaceutical manufacturers.

[59]

There being no reason for decision common to the majority of the justices, the Court's decision is authority only in relation to the statutory and factual situation it resolved and in relation to a case which has, if not precisely, at least substantially and indistinguishably the same statutory and factual situation. His Honour concluded that he ought to regard the decision as decisive of the validity of the licensing provisions under challenge in Dickenson's Arcade. They were provisions whereby the licence fee permitting the retail sale of tobacco was calculated by reference to the average monthly value of tobacco handled by a retailer over the period of six months prior to the commencement of the licence period. Menzies, Gibbs, Stephen and Mason JJ. also each found the decision in Dennis Hotels decisive of the validity of the tax. Menzies J. [62] , having rejected a challenge to the correctness of the earlier decision, added in a passage adopted by Stephen J.: In any event I would not reopen either part of the decision in Dennis Hotels Pty. Ltd. v. Victoria. 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 [63] and in Anderson's Pty. Ltd. v. Victoria [64] . Cf., also, Gibbs J. [65] ; Stephen J. [66] . Mason J., while accepting that the decision in Dennis Hotels was decisive of the validity of the tobacco retail licence fee, made an important statement upon which the present plaintiff relies. His Honour said [67] : Dennis Hotels 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. 1. (1960) 104 C.L.R. 529. 2. (1974) 130 C.L.R. 177. 3. (1974) 130 C.L.R., at p. 188. 4. (1974) 130 C.L.R., at p. 212. 5. (1963) 110 C.L.R. 264. 6. (1964) 111 C.L.R. 353. 7. (1974) 130 C.L.R., at pp. 224-227. 8. (1974) 130 C.L.R., at p. 236. 9. (1974) 130 C.L.R., at p. 240.

[74]

In Western Australia v. Chamberlain Industries Pty. Ltd. [20] , Barwick C.J. referred back to the passage in his judgment in Anderson's Pty. Ltd. which I have cited and added: It is not enough that the effect an Act in its operation produces has the like effect which a duty of excise would in the circumstances produce. The Act must impose or authorize the imposition of a tax which in its nature is a duty of excise. The Court has endorsed the view that "a tax is not a duty of excise unless the criterion of liability is the taking" of such a step as I have described. Of course, as his Honour indicated in Anderson's Pty. Ltd. [21] and repeated in Chamberlain [22] , the criterion of liability will not be found exclusively in the verbal formulae of the statute. I understand the obligation to have regard to substance rather than form to mean that one must ask whether the real operation and effect of the Act by which the duty is imposed is to tax the goods directly, whatever be the means it employs. The question is a legal one. Economic consequences are irrelevant. In Chamberlain [23] , Walsh J. elucidated the question of substance rather than form in words which I would respectfully adopt: When it has been said that the character of a duty depends upon the operation and effect rather than upon the form of the Act by which it is imposed I think that what has been meant is that an examination must be made of the provisions of the Act to determine its legal effect, according to the proper construction of its operative provisions, whatever their form may be and whatever label may be attached by the Act to the duty which is imposed by it. Cf. also, Dickenson's Arcade [24] , per Barwick C.J. 1. (1963) 110 C.L.R., at p. 271. 2. (1963) 110 C.L.R., at p. 273. 3. (1960) 104 C.L.R., at p. 559. 4. (1964) 111 C.L.R., at pp. 364-365. 5. (1970) 121 C.L.R. 1, at p. 13. 6. (1964) 111 C.L.R. 353. 7. (1970) 121 C.L.R., at p. 15. 8. (1970) 121 C.L.R., at p. 37. 9. (1974) 130 C.L.R., at p. 186.

[77]

I turn now to the legal operation of the legislation as it is in substance: 1. Payment of the fee is a condition precedent to the grant of a licence. In this respect it contrasts with the fee in Kailis : see per Menzies J. [4] . The fee is a tax. 2. The licence authorizes the operation of an abattoir in the premises referred to in the licence subject to any conditions or restrictions contained in the licence. 3. There are heavy penalties for operating an abattoir without a licence. 4. The maximum duration of a licence is a period of one year. A licence may be renewed, the renewed licence operating as a fresh licence from the date of expiry of the old one. 5. Stringent conditions govern the issue of a licence. The premises must satisfy the prescribed standards of construction. The application must be refused if the Authority is of the opinion that the site of the proposed premises is unsuitable or that the area is already adequately served by other premises or that the applicant is unsuitable or that the application lacks merit. 6. The amount of the fee is calculated by reference to the number of animals slaughtered in the premises during the twelve months ending on 30 June prior to the date of the application. Different rates, ranging from 1.25 cents per animal to 10 cents per animal, are prescribed for different kinds of animals. The weight of each animal is immaterial. There is no provision for any refund of any part of the licence fee if, in the course of the licence period, the licensee closes down the business or the licence is cancelled or suspended. 7. The payment of the fee and the issue of the licence are wholly prospective in their effect. That effect is the authority to operate the abattoir, including in that operation the slaughtering of animals and the preparation of meat and other products for sale, throughout the period of the licence. No tax is imposed by the Act on any specified aspect of the operation. In particular, no tax is imposed on the slaughtering of any animal or on any of the products that result from the operation of the abattoir. Any number of animals may be slaughtered and their carcasses processed under the authority of the licence. It is to be expected that the number of animals coming forward for slaughter will vary markedly from year to year because of changing weather conditions and the state of the market generally. 8. If a licence is renewed for a further year, the size of the fee which must be paid for that licence will be determined by reference to the number and kind of animals that were slaughtered under the authority of the preceding licence. But it is not those acts of slaughter that attract the tax for the ensuing year. What attracts the tax is the application for authority to continue to operate the abattoir in the year that is to come. 9. If it matters, the fee is not an indirect tax. It cannot have been imposed with the expectation that its incidence on the finished products emanating from the abattoir will be passed on in any precise way down the line until they reach the consumer. A moment's reflection shows how impossible it is for any particular part of the fee to attach to any particular product. Let it be assumed that a tax of 10 cents is imposed upon the act of slaughtering each cow. When the cow has been processed through the abattoir it will be represented by a variety of products ranging from dressed carcasses, sides and quarters, meat, offal, pet food material, sausage casings, skins, hides, meat meal, tallow, blood meal, gall and hair. Furthermore, the weight of each animal may vary considerably. Accordingly, it would be quite impossible to isolate a discrete component of such tax as being referable to any particular product. 10. Again, if it matters, the consideration which moved Jacobs J. to distinguish the facts in Sleigh [5] from those in Dennis Hotels [6] and Dickenson's Arcade [7] is not present here. The licensing scheme cannot be described as a mere vehicle for collecting the tax. The legislation is a detailed and comprehensive scheme for ensuring the efficient and hygienic operation of the meat industry in New South Wales. An abattoir licence is a valuable right attaching to particular premises which allows the licensee to participate in that industry. It is transferable with the approval of the Authority.

[100]

To hold that Dennis Hotels is decisive of the present case would, I think, give the constitutional prohibition contained in s. 90 a formal operation, having little substantial importance. It would enable the States to impose a tax on the manufacture or production of any goods by the simple expedient of a compulsory licensing scheme under which production and manufacture are taxed by prescribing licence fees to be assessed, not by reference to the quantity of goods produced under the licence, but by reference to the raw materials used in the process of production in a period ending before the licence commenced to operate. Gibbs and Stephen JJ., in dissent, regarded Dennis Hotels as requiring the validity of the licence fees to be upheld [23] but it cannot be said that their view as to the scope of the proposition established by Dennis Hotels was a minority view. McTiernan and Menzies JJ., who with Mason J. constituted the majority, distinguished Dennis Hotels on grounds different from those relied on by Mason J. The Kailis Case did nothing to erode the authority of Dennis Hotels and Dickenson's Arcade although the conflict in opinion as to the scope of the proposition supported by those cases remained unresolved. So much was accepted by Barwick C.J., Gibbs, Stephen and Mason JJ. in H. C. Sleigh [24] . That case was concerned with licences to sell petroleum products where the licence fee was calculated on the licensee's turnover during a preceding period. On either view, that case came within the scope of the proposition for which Dennis Hotels is authority. However, Barwick C.J. [25] stated his "substantial agreement" with the view of Mason J. [26] that the majority judgments in Dennis Hotels would not necessarily govern all cases, "in particular cases where a licence similarly calculated was imposed on the manufacture or production of goods" [26] . Jacobs J., dissenting, refused to accept the "so-called "logical" extensions" of the earlier cases [27] : What has happened is that decisions that a licence fee is not necessarily a duty of excise where the amount of the fee is calculated on the basis of dealings in a commodity for a preceding period has been taken by the legislature to be a decision that a licence fee cannot be a duty of excise provided that the fee is so calculated. Murphy J. [28] stated his opinion that "it makes no difference whether the calculation of the licence fee is based upon transactions of a past financial year or on those of the current year" and he regarded the Dennis Hotels and Dickenson's Arcade tests as unsatisfactory. 1. (1974) 130 C.L.R. 245. 2. (1974) 130 C.L.R., at p. 265. 3. (1974) 130 C.L.R., at pp. 259, 263. 4. (1977) 136 C.L.R., at pp. 488, 493, 497, 500. 5. (1977) 136 C.L.R., at p. 488. 6. (1977) 136 C.L.R., at p. 500. 7. (1977) 136 C.L.R., at p. 500. 8. (1977) 136 C.L.R., at p. 525. 9. (1977) 136 C.L.R., at p. 527.

[123]

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. It is, I think, important to recognize that the setting of the passage which I have just cited was a case in which the significant tax was a victualler's licence fee. It was held not to constitute a duty of excise. The fee was exacted for the privilege of carrying on the business of a licensed victualler and was calculated at the rate of six per cent of the amount paid for liquor purchased within the twelve months ending with the last preceding 30 June. It was a fee which was exacted for the renewal of the licence. The passage which I have cited formed an essential part of the reasoning of Kitto J. which led him to the conclusion that the licence fee in that case was a payment for a franchise and not a tax upon goods and, therefore, not a duty of excise. It is true that this reasoning was not applied by a majority in the Dennis Hotels Case, because Fullagar J. thought that the issue could be determined by the fact that an excise duty could not be a tax upon the distribution of goods and must be confined to a direct imposition upon their production or manufacture. That view is, of course, no longer tenable. But it was the approach of Kitto J. which was subsequently accepted unanimously in Bolton v. Madsen [52] by a court comprising six justices and the passage which I have cited was crucial to that approach. Nor was Kitto J. merely offering a guide which might be helpful in determining whether a particular impost constitutes an excise duty. He was dealing with the essential quality of an excise duty as a legal concept and was pointing out that in legal terms there can be no guide other than the criterion of liability selected by the statute imposing the tax. If this did not appear with ample clarity at the time he first propounded the test, Kitto J. put it beyond doubt in Western Australia v. Chamberlain Industries Pty. Ltd. [53] when he said: And there is no other way of determining from legislation the character of a tax that it imposes than by ascertaining what criterion of liability the legislation selects. To say this is not to substitute a formula for the words of the Constitution; it is simply to recognize the essential nature of the question that arises when a particular tax is said to possess a character to which the Constitution refers. The unequivocal terms in which this Court in Bolton v. Madsen [54] adopted Kitto J.'s approach can leave no doubt about the central importance of the criterion of liability in determining whether a tax is a duty of excise, for there it was said that "it is the criterion of liability that determines whether or not a tax is a duty of excise". 1. (1960) 104 C.L.R., at p. 559. 2. (1963) 110 C.L.R., at p. 264. 3. (1970) 121 C.L.R. 1, at p. 20. 4. (1963) 110 C.L.R., at p. 271.

[135]

Turning to the abattoir licence fee in this case, I may gratefully adopt the analysis of the relevant legislation and of the effect of that legislation which is contained in the reasons for judgment of the Chief Justice and Wilson J. The licence is a licence to operate an abattoir and the fee which is imposed is by reference to the number of animals slaughtered during a period of twelve months which precedes the issue of the licence. A different rate is prescribed for different types of animals. A licence may be transferred by the licensee to another person, although only with the approval of the Meat Industry Authority. If a licence is suspended or cancelled, as it may be in certain circumstances, or if the licensed business ceases operations during the currency of the licence, there is no provision for the repayment of any part of the licence fee. The animals slaughtered do not represent the product of the abattoir, for the animals are further processed to produce commodities in the form of dressed carcasses, meat, offal, pet food material, casings, skins, hides, meat meal, tallow, blood meal, gall and hair. The significance of this is that there is no discernible relationship between the products of the abattoir and the fee imposed for the privilege of running the abattoir and that would be so even if the fee were calculated by reference to the animals slaughtered during the period of the licence, rather than by reference to those slaughtered in a past period: cf. Swift Australian Co. (Pty.) Ltd. v. Boyd Parkinson [67] . What may be produced by way of final product from different animals may vary considerably both in quantity and kind and even if the fee were to be regarded as a tax upon the slaughter of animals, it could not be regarded as an excise duty upon whatever products might result from the treatment of the carcass. A duty of excise may not require a strict or mathematical relationship between the tax and the quantity or value of the goods produced but there must be a sufficiently close relationship between the tax and the production of the goods to show that the tax affects the goods as the subject of production: see Matthews v. Chicory Marketing Board (Vict.) [68] , per Dixon J.

[137]

However, the fee is calculated by reference to animals slaughtered in a period which precedes the period of the licence and, even assuming that the slaughter can be identified as a step in the production of the ultimate products, to my mind the result is necessarily dictated by the principle which lies behind the decision in the Dennis Hotels Case [69] , accepted as it was by this Court in Dickenson's Arcade Pty. Ltd. v. Tasmania [70] , H. C. Sleigh Ltd. v. South Australia [71] and Evda Nominees Pty. Ltd. v. Victoria [72] . I am unable to accept that those decisions involved no principle and that their application is to be confined to those cases in which an exact parallel can be drawn between the factual situation and legislation with which the previous cases dealt. The acceptance by this Court in Bolton v. Madsen of the test propounded by Kitto J. in the Dennis Hotels Case makes it artificial in the extreme, in my view, to suggest that the decision in the Dennis Hotels Case must be confined to the legislation and facts of the precise kind dealt with in that case. In particular, I can see no justification for drawing a distinction between production or manufacture and distribution as was done by Mason J. in M. G. Kailis (1962) Pty. Ltd. v. Western Australia [73] : see also H. C. Sleigh Ltd. v. South Australia [1] . It was that distinction upon which the plaintiff relied in this case. It may be conceded, as I have pointed out earlier in this judgment, that an excise duty is essentially a tax upon production or manufacture notwithstanding that its imposition may be upon a step in the distribution of goods. But that in no way weakens the requirement that it must be a tax upon goods and it will only be a tax upon goods if it is payable upon some step taken in relation to them, whether it be in relation to their production, manufacture or distribution. A tax imposed for the privilege of producing goods is not an excise duty unless some such relationship can be established and it cannot be established by reference to past production which, if it is related at all to the production of the licensee during the period of the licence, is no more than a matter of coincidence. The abattoir licence fee is not a duty of excise and, accordingly, I would allow the demurrer of each defendant.