HC Sleigh Ltd v South Australia

HC Sleigh Ltd v South Australia - [1977] HCA 2 - HCA 1977 case summary — Zoe

[7]

The plaintiff company challenges the validity of the Business Franchise (Petroleum) Act, 1974-1975 S.A.. That Act had a short life. It came into operation in December 1974 and was repealed on 24th December 1975. In the meantime it had been amended. It is unnecessary for present purposes to distinguish between the unamended and the amended form of the Act; reference need only be made to the latter. The Act made it unlawful for any person to carry on the business of selling petroleum products on and from 24th March 1975 unless he was the holder of a licence: s. 11 (1). If a person was convicted of an offence against that provision, the court was required to impose upon him a penalty which included such amount (if any) as had been certified by the Commissioner as the amount by which the convicted person had benefited financially through non-payment of licence fees: s. 11 (1a). There were nine classes of licences: s. 12; the class of licence required depended mainly on whether the products to be sold were, or included, products manufactured by the licensee and whether the intended buyers were, or included, other licensees: see the definitions in s. 4 (1). An ordinary retailer of petrol from a service station required a class 9 licence, which authorized the licensee to carry on at the premises specified in the licence the business of there selling petroleum products not manufactured by him and not manufactured at those premises, and to sell them only to persons who were not licensees. It was unlawful for a licensee to sell petroleum products except as authorized by the licence held by him (s. 13 (1)). During the currency of the Act there were two "licence periods" - (a) the period commencing on 24th March 1975 and ending on 23rd September 1975, and (b) the period commencing on 24th September 1975 and ending on 23rd December 1975: s. 4 (1). The fee payable for any licence comprised a fixed sum of money and a further amount which (except in the case of a class 9 licence) was "the prescribed percentage of the value of the quantity of petroleum products sold by the applicant during the relevant period reduced by the quantity of any petroleum products non-accountable in respect of that period": s. 14 (2). The "relevant period" meant, in relation to a licence to be in force during the first licence period, the financial year ending on 30th June 1974, and in relation to a licence to be in force during the second licence period, the financial year ending on 30th June 1975: s. 4 (1). The question what quantity of any petroleum product was "non-accountable" in respect of any period was dealt with (rather obscurely) in s. 14 (1). Any petroleum product which had been sold by one licensee to another, whether or not during the relevant period (other than any of such product held for resale by the latter licensee at the end of the next preceding relevant period), and which was either resold by the latter licensee during the relevant period, or wasted or lost by the latter licensee during that period, or held for resale by the latter licensee at the end of that period, was non-accountable so far as the former licensee was concerned. This reduction for "non-accountable" petroleum product was inapplicable to the ultimate reseller who held a class 9 licence and whose fee therefore included simply "the prescribed percentage of the value of the quantity of petroleum products sold by the applicant during the relevant period". The Commissioner was given power to reassess the fee in any case where in his opinion it was assessed incorrectly: s. 22. The fee for a licence was payable when the application was made for the licence unless the applicant elected to pay the fee by instalments; in the latter case the first instalment was payable on the application: s. 19 (1) (c). However, the Commissioner might refuse to grant a licence notwithstanding that the fee was paid: s. 19 (1). The Act did not lay down any criteria to guide the Commissioner in deciding whether to grant or refuse a licence, when the application had been made in due form and the fee had been paid. Provision was made for an appeal to a tribunal against a refusal by the Commissioner to grant a licence and against the assessment or reassessment of a licence fee: s. 25.

[11]

I can see no ground of distinction between those two decisions and the present case. The circumstances that the legislation there considered may have provided a means of regulating the trade in liquor and tobacco, and that the licence itself may have constituted a valuable privilege (at least in the case of a liquor licence) do not distinguish those cases from the present, where the purpose of the licence is to enable the fees to be collected. The fees there in question were held not to be duties of excise, not for those reasons, but because they did not amount to taxes upon goods. I need not add to what I have said in relation to this matter in Dickenson's Arcade Pty. Ltd. v. Tasmania [94a] . Nor in my opinion does the presence in the Act of ss. 14 (1) and 22 distinguish the legislation now in question from that considered in those cases. Section 14 (1) may be thought to reveal an intention that any particular gallon of a petroleum product shall be brought only once into the assessment of a fee for any licence or licences, and thus to support the view that it is intended that the tax shall be placed once on each gallon of petroleum product as it progresses from the first to the last seller. However, this does not alter the fact that the fee is based on the value of goods sold during an earlier period, and it remains true to say that under the Act no sale of petrol, either during the "relevant period" or during the "licence period", creates a liability to pay the tax. The discretionary power given to the Commissioner by s. 22 to reassess the fee does not in my opinion alter the nature of the tax. It was also argued that it was relevant to the question whether the fee was a duty of excise that the amount of the fee forms a component of the prices that may lawfully be charged to consumers of petroleum products in South Australia, pursuant to the Prices Act, 1948-1974 S.A. and to a Prices Order made thereunder, and to exemptions granted under the Prices Justification Act, 1973-1974 Cth, and that have in fact been charged to such consumers. The fact that the fee is in fact passed on by the licensee to the consumer means no doubt that it may be described as an indirect tax, but that alone does not make it an excise. None of these matters leads to the conclusion that any sale of petroleum products is taxed, or that the fee bears any other than "a coincidental relationship" (to use the words of Stephen J. in Dickenson's Arcade Pty. Ltd. v. Tasmania [95] ) to the products sold during the period of the licence.

[13]

Counsel for the plaintiff in their argument relied heavily on M. G. Kailis (1962) Pty. Ltd. v. Western Australia [96] , which it was suggested weakened the authority of Dickenson's Arcade Pty. Ltd. v. Tasmania [97] . In that case the majority of the Court (McTiernan, Menzies and Mason JJ., Gibbs and Stephen JJ. dissenting) held that s. 35G of the Fisheries Act, 1905-1971 W.A. purported to impose a duty of excise and was invalid. Under that Act it was unlawful to carry on the processing of fish for the purposes of sale except under the authority of a licence for which a fee was payable. One member of the majority, Menzies J., considered that the effect of the legislation, on its proper construction, was that the fee was to be assessed by reference to the fish acquired for processing during the period of the licence. On that view, of course, both Dennis Hotels Pty. Ltd. v. Victoria [98] and Dickenson's Arcade Pty. Ltd. v. Tasmania [97] were clearly distinguishable. The other members of the Court considered that the fee was to be assessed by reference to the value or cost of fish acquired during an earlier period. Mason J. nevertheless distinguished Dennis Hotels Pty. Ltd. v. Victoria [98] for a reason that he had expressed in Dickenson's Arcade Pty. Ltd. v. Tasmania [99] , namely that it "should not be regarded as authoritative in relation to the prescription of fees for licences to manufacture or produce goods" [1] . Neither Menzies J. nor Mason J. questioned the authority of those decisions so far as they related to fees for a licence to carry on a business of selling goods. The two members of the Court who were in the minority, in conformity with the opinions which they had expressed in Dickenson's Arcade Pty. Ltd. v. Tasmania followed and applied Dennis Hotels Pty. Ltd. v. Victoria. Only the judgment of McTiernan J. is opposed to the authority of those decisions; he gave effect to the opinion he had expressed in Dickenson's Arcade Pty. Ltd. v. Tasmania [2] , where he had said that Dennis Hotels Pty. Ltd. v. Victoria was not a precedent governing that case: that, however, was a dissenting opinion. The judgments of the majority of the Court in M. G. Kailis (1962) Pty. Ltd. v. Western Australia [96] have no common basis and for that reason the authority of that case would appear to be limited to the very question it decided, i.e. that s. 35G is invalid, but it is apparent that four of the five members of the Court accepted the authority of Dickenson's Arcade Pty. Ltd. v. Tasmania so far as it relates to fees for licences to sell goods.

[18]

The plaintiff obtains the petroleum products which it sells in South Australia from a refinery operated at Port Stanvac in that State by two other companies, Esso and Mobil. The products are obtained pursuant to a system known as "refinery exchange". In short, Esso and Mobil sell and deliver petroleum products to the plaintiff in South Australia, in consideration of the plaintiff selling and delivering petroleum products to Esso and Mobil from a refinery in New South Wales. The refinery exchange system obviates the need for petroleum products to be moved interstate, but a transaction entered into to avoid the necessity of engaging in interstate trade cannot for that reason itself be regarded as part of interstate trade. The operation of the refinery exchange system involves communications between oil companies in different States, and the movement of debits and credits between and among those companies. It thus in my opinion involves interstate commerce or intercourse. However, the Act has no legal effect on that commerce or intercourse. The fact that the sales by Mobil and Esso to the plaintiff of petroleum products refined at Port Stanvac are made pursuant to the refinery exchange system does not convert them into transactions of interstate trade. They are sales made within South Australia of petroleum products produced within South Australia, and are part of the domestic trade of South Australia. Some of the products so sold are delivered by Mobil or Esso or transported by the plaintiff from Port Stanvac to distribution points situated in other States, namely Victoria, Tasmania and New South Wales. That, however, is not enough to convert the sale to the plaintiff into an interstate transaction. For that result to ensue it would be necessary that the agreement for sale to the plaintiff should contain a stipulation that the petroleum products should be despatched from the refinery in South Australia and delivered by the seller to the plaintiff in a State other than South Australia: see W. & A. McArthur Ltd. v. Queensland [5] which on this point has often been cited with approval.

[27]

Accordingly, for the reasons which emerge from the majority judgments in Dickenson's Arcade [7] , I reject the attack upon the present legislation based upon s. 90 of the Constitution. There is but one further observation to be made concerning duties of excise. It was submitted that to distinguish between a licence fee calculated on sales or turnover of a past period and one calculated on current sales or turnover is merely artificial, that it lacks some worthwhile quality of reality and is destructive of clear constitutional intent. So to submit is to assume that the exclusive nature of the federal Parliament's power to impose duties of excise can readily and with accuracy be explained by reference to constitutional purpose or historical reasons, that purpose or those reasons providing a reliable guide to the identification of the precise field of revenue-raising from which the States are to be excluded. Yet experience in the past suggests that neither source offers certain guidance and that it is, instead, to the meaning of "duties of excise" that attention must be directed if the extent of the area immune from State exaction is to be discovered. If, then, it be a feature of "duties of excise" that they are directly related to goods and are imposed at some step in their production or distribution (Bolton v. Madsen [11] ) it is entirely realistic that importance should be attached to the distinction to which I have referred, constitutional limits of revenue-raising power being fixed by reference to the particular character which an impost bears, it necessarily follows that a feature of that impost relevant to that character will be an important determinant of validity. Moreover, since s. 90 denies to the States only those imposts of a particular character, it is to be expected that imposts especially designed so as to lack that character will be resorted to; this is no more than the consequence of delimiting legislative capacity by reference to a particular class of impost identifiable by particular characteristics.

[37]

However, subsequent cases indicated that the criterion of liability enunciated in Bolton v. Madsen no longer commanded unqualified acceptance (see Anderson's Pty. Ltd. v. Victoria [16] ; Western Australia v. Hamersley Iron Pty. Ltd. [No. 1] [17] ; Western Australia v. Chamberlain Industries Pty. Ltd. [18] ). Then, in Dickenson's Arcade Pty. Ltd. v. Tasmania [19] the Court held that Pt III of the Tobacco Act 1972 Tas. did not impose an excise. Part III prohibited the retail sale of tobacco without a licence and imposed as a fee payable for the licence an amount calculated by reference to the value of tobacco handled by a retailer during the period of six months prior to the commencement of the licence. With the exception of McTiernan J., all the members of the Court regarded the licence fee as indistinguishable in any relevant respect from that imposed by s. 19 (1) (a) of the Licensing Acts in Dennis Hotels [20] . I indicated then that, although I accepted Dennis Hotels as an authoritative decision in relation to a licence fee having similar characteristics, I did not regard the majority judgments as expressing a principle that would necessarily govern all cases, in particular cases where a licence similarly calculated was imposed on the manufacture or production of goods. So in M. G. Kailis (1962) Pty. Ltd. v. Western Australia [21] , in which judgment was delivered on the same day as in Dickenson's Arcade [22] , I concluded that the licence fee payable for the processing of fish under the Fisheries Act W.A. was an excise. There the mode of calculation of the licence fee was, as I thought, though Menzies J. thought otherwise, indistinguishable from the s. 19 (1) (a) fee in Dennis Hotels and the fee in Dickenson's Arcade. But it was a fee payable in respect of the processing of fish, that is, in respect of manufacture and production, whereas in Dennis Hotels the fee payable was in respect of the sale of liquor and in Dickenson's Arcade in respect of the sale of tobacco.

[74]

In support of its case the plaintiff seized on an observation made by Rich and Williams JJ. in the Bank Nationalization Case where their Honours said [36] : "A contract between A in Sydney and B in Melbourne by which A agrees to deliver goods to B in Sydney in exchange for goods to be delivered by B to A in Melbourne is a transaction of trade and commerce among the States." With respect to their Honours, the example given is not an instance of interstate trade. The contract supposed does not call for the delivery of goods across a State boundary; it therefore does not involve interstate trade. Moreover, there is no importation or movement of goods from one State to another; consequently the goods do not enter interstate trade. That this is so is made clear in W. & A. McArthur Ltd. v. Queensland [37] where it was held that of the following transactions entered into by travellers in Queensland on behalf of the plaintiff, a Sydney company, "(1) they offer for sale goods of the descriptions sold by the plaintiff, to be delivered in Queensland; (2) they obtain offers to purchase goods of the descriptions sold by the plaintiff, and forward the offers to the plaintiff in Sydney, where they are accepted, and the goods are in fact despatched to the purchasers in Queensland; (3) they make agreements to sell goods of that description to be delivered in Queensland; and (4) they make agreements to sell goods of that description, stipulating that the goods are to be despatched from the plaintiff's warehouse in Sydney and delivered by plaintiff to purchasers in Queensland " [38] , only the fourth was held to be an example of interstate trade [39] . This view of the constitutional conception of interstate trade has been consistently maintained ever since (see Carter v. Potato Marketing Board [40] ; Chapman v. Suttie [41] ; Mikasa (N.S.W.) Pty. Ltd. v. Festival Stores [42] ; S.O.S. (Mowbray) Pty. Ltd. v. Mead [43] ; and North Eastern Dairy Co. Ltd. v. Dairy Industry Authority (N.S.W.) [44] ).

[77]

The plaintiff's second submission is founded on certain transactions which are pleaded in pars 28 to 30 of the amended statement of claim. The plaintiff submits that each group of transactions constitutes interstate trade and commerce. Paragraph 28 alleges that the plaintiff has carried on and intends to carry on at distribution points in South Australia the business of selling in that State petroleum products and delivering such products to purchasers resident in Victoria. The particulars which follow show that sales are made in South Australia to purchasers in Victoria and that deliveries of the products thus sold are made by the plaintiff and in one instance by a carrier from distribution points in South Australia to destinations in Victoria. There is, however, no allegation that the contracts of sale call for delivery across the border. Paragraph 29 alleges that the plaintiff has carried on the business of receiving orders for petroleum products from purchasers resident in South Australia and "pursuant to such orders delivering such petroleum products from Victoria into South Australia" where the products are sold to the purchasers. The particulars of this allegation indicate that the plaintiff received orders from its agent in Mount Gambier for petroleum products from purchasers in South Australia and that the plaintiff satisfied these orders by transporting petroleum products from Portland in Victoria either directly to the purchasers or to its agent at Mount Gambier who thereupon delivered or caused to be delivered the products to the purchasers. Here again there is no allegation that the contract called for delivery across a State border. The plaintiff would have been at liberty to satisfy the order by making a delivery from stocks in South Australia. Paragraph 30 alleges that the plaintiff receives orders for petroleum products from purchasers in South Australia and "pursuant to such orders delivers products from Broken Hill in New South Wales into South Australia" where the products are sold to the purchasers. The particulars indicate that deliveries are made by the plaintiff from Broken Hill to a destination in South Australia, but once again the paragraph and the particulars do not contain any allegation that the contract required the petroleum products to be delivered across a State border.

[127]

It appears to me that the following propositions have been established by the authorities. A duty of excise under s. 90 is a tax on goods: Peterswald v. Bartley [66] . The goods taxed may be primary production: Matthews v. Chicory Marketing Board (Vict.) [67] ; Parton v. Milk Board (Vict.) [68] ; or manufactured goods: John Fairfax & Sons Ltd. v. New South Wales [69] . The fact that the tax is payable personally by a nominated person - producer, manufacturer, vendor or purchaser (other than ultimate consumer), does not prevent the tax being a tax on goods: passim. The goods do not have to be in existence at the time the tax is calculated: Matthews v. Chicory Marketing Board (Vict.) [70] and a sum payable may be a tax on goods if it is so in substance though not in form: Commonwealth Oil Refineries Case [71] ; Homebush Flour Mills Case [72] ; Matthews v. Chicory Marketing Board (Vict.) [73] . However, although every duty of excise is a tax on or in relation to or in respect of goods, not every tax on or in relation to or in respect of goods is a duty of excise. A tax imposed on a consumer in respect of the ultimate consumption of goods is not a duty under s. 90: Dickenson's Arcade Pty. Ltd. v. Tasmania [74] . A tax imposed on goods simply in relation to their ownership or use is not a duty of excise: Browns Transport Pty. Ltd. v. Kropp [75] ; Bolton v. Madsen [76] . A tax on goods which is a duty of excise may be one imposed in relation to their production: Matthews v. Chicory Marketing Board (Vict.) [73] ; M. G. Kailis (1962) Pty. Ltd. v. Western Australia [77] ; or to their manufacture or processing: Homebush Flour Mills Case [72] ; Swift Australian Co. (Pty.) Ltd. v. Boyd Parkinson [78] ; or to their first sale after production or manufacture: Commonwealth Oil Refineries Case [71] ; John Fairfax & Sons Ltd. v. New South Wales [79] ; or to their subsequent sale: Parton v. Milk Board (Vict.) [80] ; Victoria v. I.A.C. (Wholesale) Pty. Ltd. [81] . A sum payable for services provided in respect of the goods themselves is not a tax: Harper v. Victoria [82] ; but a sum levied in respect of goods where services to be given are not wholly in respect of the goods is a tax on goods and is a duty of excise even where the proceeds are payable to a body providing services to the industry in which the goods are produced: Matthews v. Chicory Marketing Board (Vict.) [83] ; a fortiori where the proceeds are payable into Consolidated Revenue: Swift Australian Co. (Pty.) Ltd. v. Boyd Parkinson [84] .

[138]

It appears to me that there is a coherent pattern of decision. It is complex but it could hardly be expected to be otherwise. The general nature of the pattern is one which gives a fairly narrow meaning to the word "excise". Nevertheless the fact that the Constitution expressly forbids the States to impose duties of excise has been carried into effect. One of the factors of difficulty which may be said to lie behind the pattern is that it does not appear clearly from the Constitution itself or otherwise why the Constitution did in such absolute terms forbid the States to impose such duties. Another factor is that the balance of revenue sources to government has changed dramatically over the years since federation. I would not deny that these factors have in varying degrees influenced decisions but the fact remains that the States cannot impose excise duties. Any fundamental re-definition of excise which would reverse the course of decision would only institute another generalization from which it would be sought to have later decisions deductively determined. That is not the judicial process. The pattern which has emerged is not comprehensive and it could not be expected, within a pattern of a limited number of decisions, to be so. From the course of decision there can be discerned in the pattern the necessity to examine the characteristic of an excise duty which makes it not only a tax on commodities in their course between manufacture or production and the ultimate consumption of the commodity or its product but a tax which has as its basis or nature or as the criterion of the liability to pay it the fact that it is a commodity. This basis or nature or this criterion of liability may be found in various factors, e.g. the indirectness of the tax, the fact that the amount thereof can or will be incorporated in the price of the commodity, the fact that the liability is imposed on the taking of a step in the course of the commodity from manufacture or production to consumption. However, it appears to me that no single or simple statement of this characteristic can be definitive. Therefore there are and probably always will be questions still undecided. One such question is whether, and if so, in what circumstances, a tax on ownership will or may be a duty of excise. Another area of decision which will continue to be filled out in the future is when a tax is in substance, though not in form, a duty of excise. The question when a duty on an instrument may be a duty of excise will probably require elaboration. In all these areas a more detailed pattern will emerge.

At a glance

Court

Decision date

Before

Source

Judgment (157 paragraphs)

Parties

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