Lansell House Pty Ltd v Commissioner of Taxation

GENERAL DIVISION VID 1035 of 2008

AND: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

background 1 At all relevant times the applicants (Perfek and Lansell) were registered for the purposes of A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the Act). Perfek, trading as Vita Vigor Australia, sold within Australia a product known as Mini Ciabatte from July 2005 until January 2007. Lansell sold the product from February 2007 to the present. Mini Ciabatte is described on its packaging as 'Italian flat bread', and is imported from Italy. 2 On 19 April 2005 Perfek requested a private ruling from the respondent (the Commissioner) on the GST status of Mini Ciabatte. On 27 May 2005 the Commissioner issued a private ruling that the product was subject to GST pursuant to item 32, Schedule 1 and par 38‑3(1)(c) of the Act. On 3 January 2006, upon a review sought by Perfek, the Commissioner confirmed the ruling. Meanwhile Perfek continued to report the sales of Mini Ciabatte as GST‑free supplies. The applicants' solicitors then disclosed to the Commissioner that Lansell had treated its sales of Mini Ciabatte as GST‑free supplies. On 30 April 2008 the Commissioner issued Notices of Assessment and liability to pay penalty to Perfek for the periods 1 July 2005 to 31 January 2007. On the same day he issued Notices of Assessment and liability to pay penalty to Lansell for the periods 1 February 2007 to 29 February 2008. The applicants' objections against their assessments were disallowed. Each has appealed to the Court against the relevant disallowance.

LEGISLATION 3 Pursuant to s 38‑2 of the Act a supply of food is GST‑free. Section 38‑4 defines "food" to include food for human consumption. That section is subject to s 38‑3. Pursuant to s 38‑3(c) a supply is not GST‑free under s 38‑2 if it is a supply of: food of a kind specified in the third column of the table in clause 1 of Schedule 1, or food that is a combination of one or more foods at least one of which is food of such a kind. Clause 1 of Schedule 1 includes, at item 32: food that is, or consists principally of biscuits, cookies, crackers, pretzels, cones or wafers.

ISSUE FOR DECISION 4 The parties differ as to the issue raised by the challenge to the assessments. The applicants contend it is whether Mini Ciabatte is bread, or whether it is "food of a kind specified" in item 32. The Commissioner contends that for the applicants to succeed, they must show on the balance of probabilities that Mini Ciabatte is not food of a kind described in item 32. He says that whether the product may also be classified as bread is irrelevant. 5 For their stand on the issue for decision, the applicants rely on the Further Explanatory Memorandum to the Bill that became the Act. Under the heading "Bakery Products", par 1.40 gives examples of food that are GST‑free. These include: · plain bread and rolls (white, wholemeal, multi‑grain, etc); · plain focaccia; · tortillas; and · pita, Lebanese and lavash bread. 6 The applicants also rely on the Detailed Food List in Part 3 of the Australian Tax Office GST Food Guide which describes itself as "rules to work out the goods and services tax (GST) status of the food items you sell". That document lists as GST‑free: · Bread and rolls (no icing or filling); · focaccia, plain or herb; · Grissini (bread sticks); and · Italian bread. 7 Section 14ZZO of the Taxation Administration Act 1953 (Cth) provides that in proceedings on an appeal under s 14ZZ to the Federal Court against an appealable objection decision, the appellant has the burden of proving that the assessment is excessive. The assessments in question have been made on the basis that Mini Ciabatte falls within item 32 as food that is, or consists principally of biscuits, cookies, crackers, pretzels, cones or wafers. Unless the applicants satisfy the Court that Mini Ciabatte is not food of such a kind, they will not discharge the onus imposed by s 14ZZO. Accordingly, in my view the question is whether the product falls within item 32. It is not whether the product is bread.

CLASSIFICATION 8 The parties were initially at odds as to whether a product may, for GST purposes, have more than one classification. The applicants contend it can have only one. For example, it cannot be both plain bread (GST‑free) and biscuit (taxable). They rely on the observation of Hill J in Air International Pty Ltd v Chief Executive Officer of Customs (2002) 121 FCR 149 (Air International) at [37] that "goods cannot for customs classification, be treated as belonging to more than one kind". 9 The Commissioner urged that Hill J's observations, in a dissenting judgment, should not be followed. He contended that even if the applicants satisfy the Court that Mini Ciabatte is bread, that will not preclude the Court from "also finding" that it is a biscuit or cracker. He relied first on the evidence of two expert witnesses. Dr Quail said the categories for bread and crackers overlap. Mr Muntoni said that in Italy Mini Ciabatte may be regarded as both cracker and bread. Evidence of this variety cannot govern the question whether, for the purposes of the Act, a product can have more than one classification, in particular for the purposes of this case, be both GST‑free and taxable. At the best the evidence shows that it will often be difficult to determine whether a product falls within one classification or another. 10 Nor am I assisted by the fact that various dictionaries refer to biscuits as a type of bread. For example, the Oxford Dictionary describes a biscuit as a "kind of crisp dry bread more or less hard". As with the evidence referred to at [9], the fact that in ordinary parlance a biscuit may be considered a type of bread merely indicates that the classification of a product as one thing or another (bread or biscuit) may not be straightforward. 11 The passage in the GST Food Guide which the Commissioner says "specifically contemplates that a product may have more than one classification", does not in truth do so. It states: Always check both the 'GST‑free food' and the 'Taxable food' lists when working out the GST status of a food item. Even though your food item appears in the GST‑free list, it may still be subject to GST under one of the taxable rules. For example, bread rolls are GST‑free unless they are sold in a restaurant. Rather than establishing the Commissioner's contention that a product may have more than one classification, this passage simply warns a food retailer of the need to look at both the lists: the 'GST‑free food' list and the 'Taxable food list' in order to determine the true GST status of an item. Thus it points against the Commissioner's contention. 12 As the case developed, it became clear that, whatever their initial positions, the parties were not in this connection really at odds. The difficulty was caused by incautious use of the word "classification". The Commissioner's contention that a product can have more than one classification was not intended to assert that it can be both GST‑free and taxable. Rather it was intended to claim that if a product is food of a kind listed in item 32, for example a cracker, it is irrelevant that it could also be "characterised" as bread. In that sense, the product can be "characterised" in more than one way. But for the purposes of the Act, it can have only one "classification". 13 The classification/characterisation issue is in my view governed by what I have said at [7]. In order to succeed, the applicants must establish that Mini Ciabatte is not food of a kind listed in item 32. They will not do that by resort to evidence that the product falls within a dictionary or other definition of bread.

APPROACH TO CLASSIFICATION 14 My attention was not drawn to any Australian cases dealing with the approach to be adopted to classification under the Act. However, assistance is provided by the decision of the Court of Appeal in Customs and Excise Commissioners v Ferrero UK [1997] STC 881 (Ferrero), a decision on the now repealed Value Added Tax Act 1983 (UK). Under that Act food was zero rated unless it was an excepted item. One of the excepted items was "Confectionary, not including cakes or biscuits". The Court approved the approach adopted by the Commissioners, that: The words in the statute must be given their ordinary meaning. What is relevant is the view of the ordinary reasonable man in the street. That is, what is the view of the ordinary person as to the nature of the product and whether or not the product is one which falls within the relevant category which here is that of biscuit. The Court affirmed the Commissioners' decision that the product in question, a wafer, was a biscuit. The Commissioners had said: we conclude that the products have some of the characteristics of biscuits. These are: the ingredients of the wafer; the manufacturing process applied to the wafer, that part of the taste which is crisp; the rapid deterioration on exposure to air; the packaging and the marketing. We also conclude that the products have some characteristics not normally associated with biscuits. These are: the size; the colour; the general appearance; the fact that the wafer is an insignificant part of the whole; and the time and place at which the product would be eaten. 15 The Court of Appeal revisited the reasonable man in Commissioners for Her Majesty's Revenue & Customs v Procter & Gamble UK [2009] STC 1990 (Procter & Gamble). Lord Justice Toulson, after referring to the endorsement of the reasonable man test in Ferrero, said at [63]: I rather regret the introduction of the ordinary man in the street into this area, because I do not regard it as necessary and it has led on to a distracting argument about what knowledge should be attributed to that hypothetical person. I agree with Jacob LJ that the approach approved in Ferrero really amounted to saying no more than that it was for the Tribunal to decide what was the reasonable view on the basis of all the facts known to the Tribunal; and it conveys that this is not a scientific question. In determining that question I do not see that any advantage is gained by referring to the hypothetical ordinary person in the street. 16 Lord Justice Jacob, with whom Mummery LJ agreed, said at [21] that what the Court had said in Ferrero was: no more than "what is the reasonable view on the basis of all the facts" - it does not matter if some of the facts would not be known to the "man in the street". That is why the test accepted as proper in Ferrero adds "who had been informed as we have been informed". The uninformed view of the man in the street is deliberately not being invoked. 17 I agree with Toulson LJ's formulation of the Ferrero test. I do not think the intrusion of the reasonable man assists the classification exercise. If the reasonable man is to be "informed" as the Court has been informed, there simply seems no place for him. 18 In Zeroz Pty Ltd v Deputy Commissioner of Taxation (1997) 35 ATR 349 at 357, a sales tax case, the Full Court said: If it were necessary to determine whether a particular product was "ice‑cream" (a combination of words used to denote a well understood product in common parlance), evidence would be adduced as to the method of making ice-cream and as to the method of making the product in question. The Tribunal could also undertake a physical comparison. It would decide as a matter of fact whether the product to be categorised was thus "ice‑cream". The same procedure was necessary in determining whether the product here in issue was or was not "frozen yoghurt". The Court went on to say that the Tribunal had first to consider whether there was a trade usage of the word or phrase to be construed. If there was no such trade usage, "then a fortiori the expression must be used in its ordinary English sense".

"OF A KIND" 19 Section 38‑3(c) speaks of food "of a kind specified in the third column …". In my view the words "of a kind" add something to "specified". If the intention had been simply to exclude the items in the table in the schedule, Parliament would have used the words "food specified in the third column". What then does "of a kind" add? In Air International the Full Court was concerned with a classification of goods under tariff subheadings in Schedule 3 of the Customs Tariff Act 1995 (Cth) - goods "of a kind used as replacement components in passenger motor vehicles". Tamberlin J, with whom O'Loughlin J agreed, said at [53]: It is helpful to look at actual use, if any, when deciding whether goods are of a kind used as replacement components. Where they are so used, then that points to a conclusion that they are "of a kind" so used. The words "of a kind" add a further level of generality to the expression "used" so that even if (to use the Tribunal's expression) the goods are not so used but are within a range of goods of a type which are used, then they satisfy the required description. … The description can apply where there is no actual use of a good as a replacement component if the goods are of that genus. That is to say they are of the same type of component which is used to replace components of passenger motor vehicles. The genus, in my view, is a relatively broad one and the word "kind" should be so construed. 20 The same approach was taken in Customs and Excise Commissioners v Mechanical Services (Trailer Engineers) Ltd [1979] 1 WLR 305, a value added tax case. The question was whether the particular goods fell to be classified as "Goods of a kind suitable for use as parts of goods within item 1 or item 5". At 316 Megaw LJ said: Presumably the three words "of a kind" have not been introduced merely for elegance of prosody or to provide meaningless padding. They do affect the meaning. It is not "the goods" - the particular articles, here the couplings and the winch - which have to be suitable for use as parts. It is the kind of goods to which those particular articles belong, their genus, which has to be thus suitable. The addition of "of a kind" would be meaningless if goods which are themselves suitable are necessarily also goods of a kind which is suitable. 21 That passage was quoted with approval by Hill J in Air International at [28]. 22 It is interesting to note that the words "of a kind" were not used in the legislation under consideration in Ferrero. There a ground of appeal was that the Commissioner had not asked whether the products were biscuits but whether they were "akin to" biscuits. The Court of Appeal held that despite the Commissioners' use of "akin to", they had applied the proper test - were the products biscuits?

STATEMENT OF MANUFACTURING PROCESS 23 The parties agreed upon a Statement of the Manufacturing Process of Mini Ciabatte (SMP). The SMP deals with the ingredients used, the making of the dough, processing Mini Ciabatte from the dough and packaging. The SMP is set out below. A. Introduction 1. Antica Forneria Padana is the manufacturer of the Mini-Ciabatte Italian Flat Bread (Mini-Ciabatte Bread). B. Ingredients 2. The only ingredients used in the Mini-Ciabatte Bread are as follows: 2.1 67.5% Wheat Flour type 00; 2.2 20% Water; 2.3 8% Olive oil: 2.4 2% Sea Salt; 2.5 1.5% Yeast; and 2.6 1 % Malt extract. 3. The origin of the aforesaid ingredients is as follows: 3.1 Wheat flour type 00 - Superfine Italian grain used for bread making; 3.2 Water - Communal drinking water; 3.3 Oil olive - obtained from second pressing of olives; 3.4 Salt- Marine Sea Salt; 3.5 Yeast - Fresh yeast for bread making (beer yeast); and 3.6 Malt extract - Malted Wheat flour in dried form is added to wheat flour for bread making.1 C. Manufacturing Process - making the bread dough 4. In the production area a baker supervises the preparation and mixing of the ingredients. 5. The flour is stored in silos. Direct from the silos, the percentage of flour necessary for the production is programmed - generally 100 kg of flour is measured into a mechanical mixer 6. Approximately 35 litres of water at 2°C temperature is then added, upon which the mechanical mixer commences to combine the ingredients. 7. As the water is added, so too is 2.5kg sea salt, about 11 litres of Olive Oil, 1.5 kg natural yeast and 500g of Malted Wheat Extract. 8. The mechanical mixer works all of the ingredients at a constant speed for 20 min until the dough becomes tender and yellow in colour. 9. The dough is then unloaded onto a plastic loam and passed through a set of mechanical rollers to be compressed. 10. The compressed dough is then cut manually into rectangular forms and placed on metal trays. 11. The dough is then rested for approximately 10 minutes at an ambient temperature of 20°C - 25°C for the process of natural fermentation to take place. 12. Approx 96 trays will be used with every 100 kg of dough. D. Processing Mini-Ciabatte Bread from the bread dough.2 13. Once fermentation is completed the dough is then worked through a moulding machine, which is set and positioned according to the item being manufactured, in this case, the Mini-Ciabatte Bread. 14. The dough is placed on a plastic mat that will carry a thickness of 0.5 millimetre which passes under a rolling mould that will cut the dough into the form desired. 15. During this procedure, 104 Mini‑Ciabatte bread will automatically be sprinkled with coarse Sea Salt. 16. The dough shapes are then placed on baking trays which are placed on trolleys ready for baking. 17. Each trolley stores 30 baking trays which are then placed into commercial conventional gas ovens set at a temperature of 200°C for 17 - 20 minutes of baking.3 18. The Mini-Ciabatte Bread is reduced after baking to a water content of 0.015%, and its weight is thereby reduced to 0.4g.4 19. Once baking is completed the trolleys are wheeled out of the ovens to a confined area with a room temperature 15°C for 20 minutes. 20. After baking, the dimensions of the Mini-Ciabatte Bread usually range in length from 60mm to 220mm, in width from 35mm to 80mm, and in depth from 2mm to 4mm. The Mini-Ciabatte Bread is ellipsical in shape. E. Packaging 21. Once the Mini-Ciabatte Bread has cooled. it is then transferred into a plastic crate in preparation for packaging. 22. These crates are transferred to another area where a number of employees are assigned to manually fill the tray containers on a scale to obtain 150g of Mini-Ciabatte Bread. 23. All filled trays are then placed in another crate and taken to another area for the final two phases of packaging. 24. During the first phase, the filled tray is placed horizontally on a flow pack conveyor that seals the tray with a transparent film. 25. During the second phase; the sealed tray is then moved onto another conveyor machine that automatically packages the tray into its own cardboard box with batch code and best by date stamped alongside where the barcode is located at the bottom of the box.5 Packaging is then complete. 1 The Mini-Ciabatte Bread contains no baking powder, bicarbonate soda or other chemical leavening products. The Mini-Ciabatte Bread contains no sugar or artificial sweeteners, no animal fats or butter, no other additives, preservatives or flavourings. 2 Mini-Ciabatte Bread is essentially produced by flattening and then cutting shapes in the bread dough. The baking then reduces the moisture content to enhance crispness and increase the shelf-life. 3 There is never any frying, roasting or toasting used. 4 By way of comparison, one "classic" (non-crisp) bread slice may weigh 100g for the same mass of product, and contain 15 %-20 % water. 5 The best by date is guaranteed for 12 months. The long shelf-life is achieved by reducing the moisture content of the product as described above.

APPLICANTS' LAY WITNESSES ‑ OVERVIEW 24 Alfred Abbatangelo is the sole director of each applicant. He deposed that his customers wanted a savoury Italian flat bread product (as opposed to grissini which is not flat but extruded). They wanted a flat product for use during a meal or on which they could place items such as cheese or antipasto. His manufacturer in Italy, Antica Forneria Padana (Antica), made a traditional Italian regional flatbread called "Ciappe Di Tagglia". Mr Abbatangelo arranged for Antica to make a product that was smaller than the traditional Ciappe product in order to satisfy his customers' requirements. Apart from the difference in size, the composition, ingredients and method of manufacture of the two products were the same. Mr Abbatangelo decided to call the product Mini Ciabatte rather than Mini Ciappe because Ciabatta was better recognised from a marketing perspective in Australia as an Italian bread. Ciabatte is also a traditional Italian regional bread, but is not dry. 25 Mr Abbatangelo described Mini Ciabatte as a leavened product using natural fermentation. It contains no animal fats or butter, but only olive oil. This produces a crisper and more distinctively flavoured product. The product is baked, and not fried, roasted or toasted. It is produced by flattening and shaping bread dough and baking it to reduce its moisture content to 0.015% to enhance its crispness and increase its shelf life. 26 Until 2007, when Lansell took over Perfek's business, the serving suggestion on the Mini Ciabatte packets was the same as that on grissini breadsticks - "Excellent with hors d'oeuvres, canapes and tapas, antipasto, dips, cheese or just on their own". After 2007 this was changed to "Delicious on their own or savour with your favourite hors d'oeuvres, antipasto, cheese, dips, salads or along with any meals and drinks". The label also contained the words "These light crisp Mini Ciabatte comes from the Italian traditional bread recipe". 27 Mr Abbatangelo said that Mini Ciabatte was sometimes displayed in customers' stores together with the applicants' grissini products. Other displays were with competing products such as Always Fresh Grissini, Lazat, Lavash and mini toast. Sometimes it was displayed in the deli area. Mr Abbatangelo said the Mini Ciabatte has never been promoted or marketed as a biscuit, cracker or pretzel, but only as an Italian flat bread. 28 Mr Abbatangelo said his customers use the Mini Ciabatte in various ways: on their own, together with their meal, as croutons in soup, and with cheese and antipasto or spreads on them. Some dip them in a tomato or basil pasta sauce. 29 Gloria Garbarini, Antica's export manager, gave evidence about her dealings with Mr Abbatangelo in relation to the manufacture of Mini Ciabatte. She said the product had always been sold in packaging describing it as an Italian flat bread. In March 2009 Mr Abbatangelo contacted her and told her that Antica's website incorrectly described the product as a "cracker". This was subsequently deleted. Ms Garbarini said that the product is treated in Italy as a bread product with a 4% value added tax and not as a biscuit with a 10% tax. 30 Ms Garbarini described the manufacturing process for Mini Ciabatte. A spiral mixer is used to mix the dough. The same mixer is used to produce what she described as "classic bread". The dough has no rest time between mixing and cutting. It rests for 10 to 15 minutes between cutting and moulding. The dough is moulded in a mould machine where it remains for 1 or 2 minutes. On removal from the mould machine, the dough is placed in the oven following a maximum wait of 5 minutes. The product is reduced after baking to a water content of 0.015%, and its mass thereby reduced to 0.4g. Ms Garbarini said that Antica's grissini breadsticks contain the same ingredients as Mini Ciabatte and are processed in the same manner. Both have a shelf‑life of 12 months and have the same moisture content of 0.015%. Their serving suggestions are identical. The only difference between the two products is "the shape, size and mass of the Grissini Breadstick which has a mass 50% greater than the Mini Ciabatte".

Dr Quail's reports 31 There are three reports. The first, dated August 2007, was prepared at the request of the applicants. It was not filed by them, but was tendered as evidence by the respondent. The second is what was intended to be a joint report of Dr Quail and Mr Carter. Mr Carter was to have given evidence for the Commissioner, but did not do so. His two affidavits were not read. The joint report, dated April 2009, was treated as a report by Dr Quail alone. I will call it Dr Quail's second report. The third report, dated 21 September 2009, was Dr Quail's supplementary report. 32 In his first report, after setting out definitions of "bread" and "biscuit", Dr Quail says it is highly unusual for biscuits to be manufactured using a dough fermentation stage. He adds that dough fermentation is usually associated with the production of bread products as it contributes to the structure of the product. Because Mini Ciabatte includes a dough fermentation stage, Dr Quail opines that it is more consistent with bread than biscuit manufacture. In his "Section Summary" Dr Quail concludes that although his definitions do not provide a simple classification of these products, they support the differentiation between breads and biscuits based on dough fermentation. 33 Dr Quail also relies on the opinion of Dan Lepard, an expert baker, which he claims is that Ciappe and Mini Ciabatte are considered to be bread in Italy and within Europe. 34 Dr Quail's second report begins with definitions of various products, including bread, biscuits, crackers and pretzels. The definitions disclose that bread usually has yeast as a leavening agent. Sometimes biscuits have yeast as an ingredient, but this is unusual. The definition of crackers contains no mention of yeast. Yeast is an ingredient of pretzel. Dr Quail then states that the main similarity of Mini Ciabatte is with the production of bread and pretzel "because all three products use yeast as a leavening agent, this will give the products a different flavour and texture to the other products". 35 In response to a question about the leavening ingredients and processes in the various foods, Dr Quail said that: · yeast is normally used in bread making; · chemical and/or mechanical leavening (though not yeast) is used in biscuit making; · there is generally no leavening agent in crackers, because they have lamination for any "lift" required; · commercial yeast is the leavening agent in pretzels. 36 In response to a question about the effect of the choice of leavening ingredients, Dr Quail said that yeast will give a more natural flavour to the product (yeasty or fermented flavour) whereas chemical leavening can leave an after taste reminiscent of the chemical used. 37 Comparing the manufacturing process of Mini Ciabatte and the other products, Dr Quail said: The similarity that Mini Ciabatte has with the manufacturing processes of bread and pretzels is that they all have a fermentation time. This period will allow the yeast to feed off available sugars which in turn starts the fermentation period resulting in a different flavour and aroma to the finished product, whereas biscuits, crackers and wafers require no fermentation time. 38 As is apparent from the foregoing Dr Quail's characterisation of the Mini Ciabatte is almost totally dependent on the absence of yeast and any consequent fermentation process in the manufacture of biscuits and crackers. 39 Other opinions expressed by Dr Quail are: · Mini Ciabatte would be consumed as a snack to carry spreads, dips or toppings. They could be used along with an anti pasto dish; · Mini Ciabatte is a small version of the Italian Ciappe flat bread and the production and final products would be considered very similar; · The main difference between grissini and Mini Ciabatte is their final shapes ‑ the grissini forming a stick and the Mini Ciabatte a flat oval; · Mini toast is eaten in a very similar manner to Mini Ciabatte, although the production method has a number of different steps (proofed and baked in a tin and then sliced and dried), and the appearance of the final product is different due to the impact of slicing across the crumb; · Mini Ciabatte has a round closed down cell structure that is similar to bread that has been under proved or condensed; · Italy has a rich tradition of bread making with a wide range of breads including flat dry breads such as the Ciappe from Liguria. Mini Ciabatte is made following very similar formulations and techniques. 40 In his third report Dr Quail concedes that the definition of cracker in his second report is inadequate because it does not refer to the use of yeast fermentation for some types of crackers. He gives three examples of crackers which have yeast as an ingredient and four that do not. All are sold in Australian supermarkets. Dr Quail then gives this "improved" definition of cracker: a cracker is a food made from flour, fat and water along with other minor ingredients including but not limited to salt, sodium bicarbonate, yeast and flavouring such as spices. A developed dough can be either sheeted and cut or laminated to form dough layers before cutting to the desired shape. The dough pieces are then docked before baking to a low moisture content of less than 5%. Dough lamination is used for the production of a flaky texture and docking is used to avoid large bubbles forming. Cracker texture can be either crisp or flaky. 41 Dr Quail went on to say "It is considered" that fermentation is applied in cracker production when the dough is intended for lamination, and that the action of the fermentation assists in the development of a dough structure for effective lamination. He said he was unable to identify any crackers that include yeast fermentation without a lamination process. 42 After noting that the processing of Mini Ciabatte includes yeast fermentation but not dough lamination, Dr Quail concludes that "this makes the processing of Mini Ciabatte different to the production of crackers described in Wade (1988) and Wade's description in this respect is consistent with other commonly available crackers in Australia". This is a reference to Wade, Biscuit, Cookies and Crackers (1988) (Wade's text).

Mr Muntoni 43 Giampiero Muntoni is a consultant to a number of Italian bread manufacturers, including Antica. He has undoubted expertise in relation to the manufacture of Italian bread products. Mr Muntoni gave evidence that Italian value added tax for bread was 4% and for other food products (including biscuits) was 10%. He holds a certificate, recognised by the European Union, which entitles him to certify whether a product is bread or a non‑bread product for value added tax purposes. He is familiar with the manufacturing process of Mini Ciabatte at Padana's premises. In July 2007 he certified for the purposes of the European Union that the Mini Ciabatte produced by Antica and exported to Lansell is a bread surrogate which "must be included in the bread category". In his opinion Mini Ciabatte is a bread product, more specifically an Italian bread. By the expression "bread surrogate" he means that Mini Ciabatte belongs to the bread category, which includes Ciappe, breadsticks and focaccia. His reasons for stating that Mini Ciabatte is a bread, and particularly an Italian artisan bread, are: · its ingredients are that of bread; · save for its size, it shares the shape, appearance and composition of Ciappe, which is officially classified as bread in the Ligurian region of Italy; and · the Italian tax office classifies Mini Ciabatte as bread for value added tax purposes.

Mr Walker 44 Richard Walker, a food analyst who is Manager of Analytical Services at BRI Research Pty Ltd, conducted a protein and fat analysis of Mini Ciabatte supplied by Dr Quail. The result of the test, carried out by internationally recognised analysis methods, and conducted with standards and blanks, was protein 10.6% and fat 5.9%.

TRADE USAGE 45 The applicants contend that the definitions in Dr Quail's second and third reports should be accepted as evidence of a trade usage of the relevant words. In the case of the second report they say this follows from Dr Quail's statement that the definitions are based on "industry usage". In fact Dr Quail says that because there is no fixed legal definition of bread, biscuits, crackers, pretzels and wafers, he has adopted definitions that in his opinion are appropriate definitions based on his expert experience and a proper consideration of listed references and industry usage. In the case of the third report the applicants rely on Dr Quail's statement that the definitions or descriptions of the products are taken from technical texts recognised widely in the industry. 46 The words in item 32 are ordinary English words in common usage. They identify household food items with which the ordinary consumer, including their vendors, are familiar. There is no indication that they are used in a specialised or trade sense that differs from the ordinary usage of the words. Dr Quail's introductory observations in his third report make plain that he is not propounding any settled, distinct meaning for each of the words. He provides a "range of definitions". Some are from well‑known dictionaries. Others are from texts dealing with baking. He continues: The differences in these definitions, together with my comments on those definitions, demonstrate that it is difficult to provide a single correct definition accepted by all that comprehensively covers a particular food‑type and excludes all foods that are not of that type, as there will always be exceptions. He goes on to say that this was why in his second report he tried to come up with reasonable definitions that provided a starting point and a basis to differentiate between the various food types, acknowledging that there will be exceptions. 47 Dr Quail's commentary on some of the definitions he provides shows that they cannot be taken as a statement of trade usage. The first of the bread definitions in his third report is, he says, incomplete because it does not attempt to include a description of the final product. It also excludes Chinese steamed bread which is widely recognised as a bread. The second bread definition he describes as "inadequate" because of important omissions. He discards the third because it is too broad, and the fourth because it does not allow for the distinction between a wide range of baked products. The definition in the second report he says requires improvement. The improved definition is Dr Quail's own. He does not propound it as a definition accepted in the trade and adopted as a specialised definition. 48 Turning to the biscuit definitions, Dr Quail again observes that descriptions or definitions in technical texts are quite general, and are not considered definitive for the reasons already given, and in particular due to the variable nature of the food product. The first of his definitions he says is not useful because it has to accommodate the American use of the word "cookie". The second he discounts because of omissions from its coverage and failure to consider products from a very wide range of ethnic origins. The third definition he puts aside as "highly inaccurate". He also discards the definition in the second report because it includes yeast as an ingredient, which is unlikely to be found in biscuits, and because it does not distinguish between biscuits and crackers. Dr Quail's improved definition does not purport to be a settled definition accepted by the trade. It is his own definition patched together from different sources, including his own expertise. 49 Dr Quail does not criticise the first definition of cracker, though he does not adopt it. He notes that Wade does not provide a separate definition of cracker, because he considers it a form of biscuit. Dr Quail discards the second definition (Macquarie Dictionary) because it relies on the biscuit definition and does not add to an understanding of cracker. He says his definition in the second report is erroneous because it does not acknowledge that yeast is used in some types of cracker. Dr Quail's improved definition does not purport to be a meaning accepted by the trade as a specialised meaning different from the ordinary meaning of the word. 50 I have referred from time to time to "the trade". There is in truth no particular trade to which the goods and services legislation is directed. It is not directed specifically to bakers or to vendors of baked food products. It is directed to all suppliers in the supply chain, and includes the manufacturer, importer, wholesaler and retailer. This underlines the high improbability of there being one settled specialised meaning of the various food types. It argues strongly in favour of the words being accorded their ordinary meaning as understood by a reasonable objective observer who has no detailed knowledge of the intricacies of the manufacture of the particular products. 51 The present case differs from that contemplated by Hill J in Pepsi Seven‑Up Bottlers Perth Pty Ltd v Commissioner of Taxation (1995) 62 FCR 289 (Pepsi Seven‑Up) at 296. There his Honour said that because many exemption or classification items used language in a sense only capable of being understood by those engaged in the course of trade or commerce in particular goods, these items would be unintelligible to a lay person without evidence from those in the trade. That is not this case. As I have said, the words in item 32 are ordinary English words in common usage. There is nothing "unintelligible" about them. 52 I am of the opinion that the words in item 32 are not used in a specialised or trade sense that differs from their ordinary meaning. Further, I do not accept that Dr Quail's definitions disclose a special trade meaning of any of the words.

ASSESSMENT OF EXPERT EVIDENCE 53 Except to record the Commissioner's opinion that Mini Ciabatte is a biscuit or cracker, Dr Quail does not in his first report refer to crackers. The evidence is that some crackers do have dough fermentation. Because he does not treat crackers as a product in their own right, as the evidence establishes they are, they are apparently to be treated as biscuits. And his opinion is that it is highly unusual for biscuits to be manufactured using a dough fermentation stage. 54 Mr Lepard's email, upon which Dr Quail relies for his opinion that Ciappe and Mini Ciabatte are considered to be bread in Italy and within Europe, does not mention Mini Ciabatte. Because of the difference in size of Ciappe and Mini Ciabatte (the latter, but not the former, looking like a biscuit), Mr Lepard's opinion about Ciappe cannot be used to attribute to him an opinion about Mini Ciabatte. 55 In his second report, when comparing the manufacturing process of Mini Ciabatte with that of the other products, Dr Quail said that Mini Ciabatte was similar to bread and pretzels because all three have a fermentation time, whereas biscuits and crackers do not. In fact the evidence is that when yeast is used in the manufacture of crackers, there is a fermentation period. 56 A number of matters bear on the weight to be attributed to Dr Quail's opinion. The first is that at the time of his earlier reports he was not aware that yeast was an ingredient in the manufacture of some crackers. The second is that the information he discovered after his second report is based on Wade's text. That was not a work he had consulted for the purpose of the earlier reports, despite the fact that they were prepared in order to refute the Commissioner's opinion that Mini Ciabatte are either biscuits or crackers. This was doubtless because, as he said, his particular expertise is the manufacture of bread - "I am less familiar with the range of conditions used for biscuit and cracker manufacture". The third matter is that in other contexts, Dr Quail diminishes the value of Wade's opinions on the grounds that they are the opinions of "an Englishman" (as Wade describes himself), and Wade does not consider products from a very wide range of ethnic origins. Fourth, as Dr Quail records, Wade does not provide a separate definition of crackers as he considers they are a form of biscuit - "Throughout this book - which is being written by an Englishman - the word biscuit is used as a generic term to include, Biscuits, Cookies and Crackers". 57 Dr Quail's opinion that Mini Ciabatte is a bread is not to my mind at all decisive as to whether it is not a cracker for the purposes of item 32 of Schedule 1. The words bread, biscuits, crackers, pretzels and wafers are all ordinary English words. As Pearce and Geddes observe, courts should be cautious of subjecting words in legislation that have an ordinary, everyday meaning to intensive analysis: Pearce DC and Geddes RS, Statutory Interpretation in Australia (4th ed LexisNexis, 2002) pp 120‑121. In Seay v Eastwood [1976] 1 WLR 1117 the House of Lords considered the word "bets" in the definition of bookmaker. Lord Wilberforce, with whom Lord Salmon agreed, said that in determining whether an activity was or was not a "bet", "refined analytical tools" were not appropriate. Decision‑makers should use their local knowledge, experience of the world and common sense, to give a sensible interpretation of the expression. An appellate court required to review such decisions should endorse those that have been reached and confirmed in this way: Seay [1976] 1 WLR at 1121. 58 The same approach was adopted by Kitto J to the expression "mining operations" in ordinary parlance in NSW Associated Blue Metal Quarries Ltd v Federal Commissioner of Taxation (1955) 94 CLR 509 at 514, where his Honour said: the conclusion must depend on one's own understanding of the sense in which words are currently used, and, although Dr. Johnson in his day defined a "quarry" as a "stone mine", it seems to me an unnatural and inapt use of language to apply the term "mining operations" to the getting of stone such as blue‑metal by open excavation, and to call the land on which those activities are conducted "a mining property". 59 The approach espoused in the above cases is especially appropriate where, as here, the question for decision is the proper classification of everyday food items for the purpose of the Goods and Services Tax. The everyday English words in item 32 must be given their ordinary and natural meaning - what is the reasonable view on the basis of all the facts known to the Court as to whether or not the product is one which falls within the relevant category, which here is crackers. Thus, it seems to me, it is inappropriate for the Court to apply refined analytical tools - in this case rather elusive and qualified technical distinctions - to an ordinary English word, rather than local knowledge and common sense. As Toulson LJ said in Procter & Gamble, this is not a scientific question. 60 It is not in my view the function of an expert to give evidence about the meaning of ordinary words such as bread, biscuit and cracker. In Australian Gas Light Co v Valuer‑General (1940) 40 SR (NSW) 126 at 137 Jordan CJ said: The question what is the meaning of an ordinary English word or phrase as used in the statute … is to be resolved by the relevant Tribunal itself, by considering the word in its context with the assistance of dictionaries and other books, and not by expert evidence … although evidence is receivable as to meaning of technical terms … See also Pepsi Seven‑Up at 296. 61 Had Dr Quail given evidence that in the baking trade the word biscuit or cracker had a recognised meaning that differed from its ordinary meaning, that would have been admissible: Herbert Adams Pty Ltd v Commissioner of Taxation (Cth) (1932) 47 CLR 222 at 227‑228 and Pepsi Seven‑Up at 297. But that is not what he has done. 62 However, I do not intend to ignore Dr Quail's collection of definitions of the various words. I will consider the meanings he derives from dictionaries or other works in the same way as I would inform myself by resort to the dictionaries or works themselves. What I may not do is to take Dr Quail's own definitions or "improved" definitions as an expert or authoritative pronouncements as to the meanings of the ordinary words. 63 I accept Dr Quail's evidence about the ingredients and manufacturing processes of the various types of food as an aid to the classification of Mini Ciabatte. 64 On the other hand I do not need an expert to educate me about the appearance (size, shape, weight, thickness) of biscuits, crackers or bread. Nor do I need to be told how those food products are used - their mode of consumption. That is something I know from my own experience. However, nothing turns on this, because Dr Quail's descriptions of the physical characteristics of the various products, and the way consumers use them (for example with cheese or spreads) accords with my own understanding. 65 I have been assisted by Dr Quail's identification of the similarities and differences between the various products, and I have given them appropriate weight. However, having been informed as to their ingredients and manufacturing processes, I am able to form my own view as to the significances of the similarities or differences. 66 I admitted evidence as to how Mini Ciabatte are regarded in Italy and in the European Union in case that should later be shown to be relevant. Having heard the whole of the evidence I am not disposed to give weight to Dr Quail's opinions about how Mini Ciabatte are regarded in Italy or in the European Community. For all I know, the meaning of biscuit or cracker may differ in Italy or Europe from that accepted or understood in Australia. For example, it may be that in Italy consumers of mini lingue would consider it an Italian flat bread because, despite its small size, it has the same ingredients as the larger Ciappe. However the size, shape, weight and overall appearance of Mini Ciabatte will in my view be of importance to how it is regarded, thought of or classified in Australia. 67 What I have said about Dr Quail's evidence is applicable to Mr Muntoni's. I give weight to what he has said about the manufacturing process of Mini Ciabatte and its ingredients. I accept that Ciappe is officially classified as bread in the Ligurian region of Italy, and that the ingredients of Mini Ciabatte are the same as those of Ciappe. However, I do not accept that the size and general appearance of Mini Ciabatte can be put aside. I refer to what I have said at [66]. I do not regard the Italian tax office's classification of mini lingue as bread for VAT purposes as a relevant indicium for Australian tax purposes. 68 I have for convenience treated Mr Abbatangelo and Ms Garbarini as lay witnesses. That is because they are primarily running commercial businesses. Nevertheless, some of their evidence was of an expert variety. As with Dr Quail and Mr Muntoni I accept their evidence about ingredients and manufacturing process, but do not attach weight to their evidence about the characterisation of mini lingue in Italy or Europe or the relevance of the VAT treatment of mini lingue in Italy.

INDICIA COMPARISON 69 In his closing submissions the Commissioner fastened upon "cracker" as the word in item 32 that best suited his case. The comparison is thus between Mini Ciabatte and cracker. The question is whether the applicants can convince me that Mini Ciabatte is not a cracker.

Ingredients 70 Dr Quail's "improved" definition of cracker lists the following ingredients: flour, fat and water along with other minor ingredients including but not limited to salt, sodium bicarbonate, yeast and flavouring such as spices. The ingredients of Mini Ciabatte are wheat flour, water, olive oil, sea salt, beer yeast and malt extract. Most of the ingredients are the same or fulfil the same purpose: flour, water, oil/fat, salt and yeast. There is no malt extract in crackers.

Ratio of ingredients 71 The percentages for crackers set out in first column below are taken from Table 1 of Dr Quail's third report. Those for Mini Ciabatte in the second column are taken from the SMP. As explained in Dr Quail's third report, bakers express ingredients as a percentage of the cereal weight, in this instance flour. Flour 100% 100% Water 40-55% 35% Yeast 0-1.25% 1.5% Vegetable oil 0-16% 11% or 6-8% Butter 0-5% 0% Salt 0-3% 2.5% Emulsifiers 0-0.5% 0% Sugar 0-1% 0% Milk products 0-2% 0% Chemical leavening 0-0.5% 0%

72 The water percentage for Mini Ciabatte is derived from par 6 of the SMP:35 litres of water per 100kg of flour. That for yeast comes from par 7 of the SMP:1.5kg of yeast per 100kg of flour. The 11% for vegetable oil comes from par 7 of the SMP:11 litres of olive oil per 100kg of flour. The 6-8% range is Mr Muntoni's evidence. The percentage for salt is derived from par 7 of the SMP. 73 It will be seen from the table at [71] that except for water and yeast, which are outside the ranges provided by Dr Quail for crackers, Mini Ciabatte falls within the other ranges. As to the water and yeast, Dr Quail described his ratios as typical ranges and accepted that there may be exceptions that fall outside them. Mr Abbotangelo described the Mini Ciabatte percentages as rough estimates. Thus I attach little significance to the fact that the water component for Mini Ciabatte is below the cracker range by 5% and its yeast component is 0.25% above the cracker range.

Manufacturing process 74 The SMP gives these stages of the manufacturing process for Mini Ciabatte: Baker supervised preparation and mixing of ingredients: pars 4‑8

Sheeting through plastic loam and mechanical rollers: par 9 Cutting of dough: par 10 Resting and fermentation: par 11 Moulding and further cutting: pars 13‑14 Baking: pars 16‑18 Cooling: par 19 Packaging: pars 21‑25. 75 Dr Quail said the manufacturing process for crackers includes "ingredients, mix, sheet, cut, bake, cool and package". Dr Quail's comparative table on page 5 of his second report states that only two of the five item 32 products - bread and pretzels - have a fermentation time. However, in cross‑examination he said that crackers which have yeast as an ingredient have some fermentation process. Thus the manufacturing processes of Mini Ciabatte and crackers are substantially the same. 76 The applicants contend for other yeast‑related features that distinguish Mini Ciabatte from crackers. It is said that yeast is used in Mini Ciabatte to give a yeast flavour, but in soda and cream crackers it is used to modify the dough properties rather than for flavour development. That is how the matter is put in Dr Quail's third report, though only by way of recording Wade's opinion. Dr Quail's own opinion appears from his cross‑examination. He was asked what other reason than for leavening would yeast be put into crackers, and he replied "you could put it in for leavening and flavour". 77 Mr Muntoni, who for some years was a baker with Mini Ciabatte's manufacturer, Antica, and is familiar with their manufacturing process, said yeast is not included in the ingredients to add flavour but "simply to make the dough rise". Accordingly, if as the applicants contend, yeast is only used in crackers to modify the dough, the use of yeast in Mini Ciabatte is consistent with that use. 78 The applicants assert that yeast fermentation is part of the manufacturing process for Mini Ciabatte, whereas crackers typically use chemical leavening, save for the manufacture of soda or cream crackers, where a yeast fermentation process is used for a different purpose, namely lamination. Dr Quail said crackers can be manufactured with or without yeast. In his improved definition of cracker, he said it was a food made from flour, fat and water along with other minor ingredients including, but not limited to, salt, sodium bicarbonate, yeast and flavouring such as spices. He also said crackers can be produced with or without yeast as an ingredient and can include fermentation stages. He did not say that chemical leavening was typically used for crackers or that yeast fermentation was confined to soda and cream crackers. He gave three examples of crackers with yeast as an ingredient, but did not describe them as soda or cream crackers. This attempt to distinguish Mini Ciabatte from crackers is not supported by the evidence. 79 The applicants seek to differentiate Mini Ciabatte from crackers on the basis that there is no dough lamination in the former, but there is in soda or cream crackers, though not in water crackers, which do not contain yeast. Dr Quail describes lamination as follows: Lamination is where you … sheet a dough flat, fold it, you may put butter between the layers or other oil between the layers, or you may just, indeed, fold the dough and re‑sheet it, and that can be done several times - probably the example most people would be familiar with would be pastries such as croissants, and that's how they get the flaky texture that's developed. In relation to what we're talking about, of a cracker product, for example, I think a Sao biscuit is the best example, … that's a laminated cracker product, and it's the laminations that give it that flaky texture when you bite it. 80 Dr Quail's first report states that crackers incorporating yeast in the form of soda or cream crackers are usually manufactured using lamination. He put it in the same way in cross‑examination - "I think most of the crackers that contain yeast tend to be made with dough lamination". He said he was unable, for the purposes of his report, to identify any crackers that include yeast fermentation without a lamination process. 81 While Dr Quail speaks only of "most crackers" and the "usual" manufacturing process, and does not claim that there is no cracker with yeast fermentation without dough lamination, I accept that it is a feature of all crackers containing yeast of which there was evidence that they are made with a lamination process. This feature distinguishes Mini Ciabatte from crackers. Either crackers contain no yeast, or they contain yeast, but undergo lamination. Mini Ciabatte contains yeast and has no lamination process.

Origins of products 82 There was no evidence as to the geographical origin of crackers. Mr Muntoni said the Mini Ciabatte was made in Italy especially for the Australian market. He also said it was "like a cracker" and "a typical Italian cracker". The full exchange in the course of re‑examination was: Interpreter: The mini lingue or the mini ciabatte - I consider that to be a crispy bread. I consider it to be a cracker because in Italy a thin bread - a long bread, a crispy bread that tends to break up, we call that a cracker. It's a bread - this is a long thin bread, which has a tendency to break up, so in that respect, it's like a cracker. Mr Greenberger: Is that what you meant when you described it yesterday as a typical Italian cracker? Interpreter: Yes, that it is a crispy bread that tends to break up. 83 It was common ground that there is no difference between mini lingue and Mini Ciabatte. The same product is sold in Italy as mini lingue and in Australia as Mini Ciabatte. The reason for the use of Ciabatte in Australia is that Ciabatte was an established name here and lingue was not. 84 Dr Quail expressed the opinion that the Italian origins of Mini Ciabatte are relevant to its characterisation. Although he did not necessarily agree with Mr Muntoni's statement that lingue is a typical Italian cracker, he accepted that it followed logically that if lingue is a typical Italian cracker, and is just a bigger version of Mini Ciabatte (or mini lingue), then Mini Ciabatte would be a typical Italian cracker. Dr Quail agreed that he was not an expert on Italian bread. The evidence was that the ingredients of lingue and Mini Ciabatte (or mini lingue) are the same, and that the only difference is the size of the product. To the extent that the Italian origin of Mini Ciabatte is relevant to classification, the above discussion points towards Mini Ciabatte being a cracker.

Use of products 85 Dr Quail said that crackers were used as a carrier for a variety of products including spreads, dips or topping such as cheeses or paste. He said that Mini Ciabatte would be consumed as a snack to carry spreads, dips or toppings. They could also be used along with an antipasto dish. Thus the uses are essentially the same. I have already observed that there is no need to rely on expert evidence in this connection. My own experience as a consumer tells me that the uses of the two products are those identified by Dr Quail.

In store display 86 Mini Ciabatte are not sold in the bread sections of supermarkets, but alongside other competing products, including crackers, in the savoury or delicatessen areas. Photographs of the relevant area of the Ringwood Coles supermarket were in evidence. They show Mini Ciabatte displayed under a large sign CRACKERS in the company of other cracker products (Sierra Crackers, Arnott's Jatz Clix crackers, Tuckers crackers, Veri Deli Rosemary & Sea Salt Cracker, Arnott's Thin Captain Crackers, Veri Deli Soy & Linseed Crackers and Waterthins Fine Wafer Crackers). The in store displays of Mini Ciabatte and crackers are substantially the same.

Marketing 87 Lansell provides the Mini Ciabatte to retail outlets in packets marked on the front "Perfetto Mini Ciabatte Italian Flat Bread". On the back of the packet the product is described as "A crunchy crisp Italian flat bread" which "comes from the Italian traditional bread recipe". The listed crackers at [86] are described as such.

Tax treatment in Italy 88 In Italy mini lingue is taxed at 4% VAT as bread, and other food products including biscuits at 10%. In the absence of any further evidence about the operation of VAT in Italy, I am unable for present purposes to attach any significance to the tax treatment of mini lingue in Italy.

Moisture content 89 In his third report Dr Quail presented a table comparing, amongst other things, the moisture content of bread, biscuits and crackers: bread (1 to 40%), biscuits (2 to 8%) and crackers (2 to 5%). In re‑examination he was asked for the principal differences between bread and crackers. He answered: "most often would be the moisture content". He said it was everyone's experience that bread usually has a significantly higher moisture content than crackers. He added that the moisture content of flat dry breads would be "quite low and similar to crackers". 90 Dr Quail was taken to a pyramid shaped figure in a publication Manly, Technology of Biscuits, Crackers and Cookies (1983) (Manly) showing the sugar, fat and water content of ten product types. He agreed with the author that biscuits are usually baked to a moisture content of less than 5%, and that Mini Ciabatte's moisture content fell in area 2 of the figure - water biscuits and soda crackers, and not area 1 - bread, pizza and crispbread.

Cell structure 91 The applicants rely on the contrast made in Dr Quail's second report between the cell structure of Mini Ciabatte and that of a cracker. He says Mini Ciabatte has a round closed down cell structure, whereas a cracker has an elongated cell structure achieved by layering the dough. However, in the course of re‑examination Dr Quail abandoned the contrast. He said that having looked at the cell structure of Mini Ciabatte more carefully, it tended to be "elongated with a length of the product". 92 The applicants also rely on the following passage from Dr Quail's re‑examination, where he identifies the main differences between Mini Ciabatte and crackers, biscuits etc: I think that probably the main thing I've identified in looking at [the Mini Ciabatte] is the final texture of the product which is crisp and cracks like we are familiar with crackers. But if you look at the cell structure and when you actually bit on this product, it has a crunch. It doesn't have the flakiness of a laminated product and it doesn't have the same crispness of a crispbread that is made without yeast. And so, it tends to be consistent with a bread dough that has been manufactured through a process similar to many other flat breads but then baked to be dry and crisp. And so, they are very subtle distinguishing features and I appreciate that, but I think that, you know, the more I've looked at it, I think that they are there. 93 Like other parts of the evidence, this passage points both to and away from Mini Ciabatte being a cracker. The first sentence identifies "the main thing" as the texture of the product which is crisp and cracks like a cracker. The second sentence notes the cell structure which gives the product a crunch when eaten. That, Dr Quail says "tends to be consistent with a bread dough". In this connection it is to be remembered that the question is not whether Mini Ciabatte is a bread but whether it is not a cracker. Evidence such as Dr Quail's, that cell structure "tends to be consistent with a bread dough", is but slight evidence that it is not a cracker, especially in the light of his first sentence. Dr Quail goes on to acknowledge that his distinctions are "very subtle", though the more he looked at it, he thinks they are there. 94 The tentative nature of Dr Quail's evidence quoted at [92], the fact that it is directed to whether Mini Ciabatte is bread rather than whether it is not a cracker, and his abandonment of the contrast he initially made between Mini Ciabatte and crackers, leads me to attach little weight to it in the balancing process. In relation to Dr Quail's "very subtle distinguishing features", the warning of Toulson LJ in Procter & Gamble at [63], with which I agree, is to be borne in mind. The decision‑maker is to decide what is the reasonable view on the facts known to it, and this is "not a scientific question".

Gluten network 95 The applicants contend that the presence of a developed gluten network is a distinguishing feature of Mini Ciabatte. They rely upon Dr Quail's evidence in his second report that: The protein level in the flours used in [bread, biscuits, crackers, pretzels and wafers] can vary from product to product but as a general rule, bread and pretzels have a higher level of protein in the flour as gluten development is required to hold the gases being produced during fermentation. The flour for these products has a protein content ranging from approximately 10.5% up to 13% depending on what style of product you require. Biscuits and wafers usually use flour with a protein content of approximately 8‑9% because you don't want as much gluten development as this will result in a chewier, softer finished product. No mention is made of the protein percentage of the flour used in crackers. However, the inference to be drawn from the first sentence is that all the products have gluten development, though bread and pretzels are likely to have greater gluten development than biscuits and wafers. In any event, this evidence does not establish that there is no gluten development in crackers. Rather it points the other way. 96 The applicants also rely on a passage in Dr Quail's third report where he records various definitions of "bread". He lists five products: white sliced sandwich bread, French baguette, Turkish pide, Middle Eastern Tanoor and Italian Ciappe, and continues: Reading down the list … they become thinner in profile, have a higher crust to crumb ratio and have a lower moisture content. All these products include development of a continuous gluten network to assist processing and contribute to the final product texture. This passage deals only with bread, and throws no light on gluten development in crackers. 97 In his discussion of the definitions of "biscuit" in the third report, Dr Quail, referring to Wade's text, says: The formation of the dough for cracker production is … more consistent with a bread dough but with lower moisture content. During mixing of cracker dough the aim is to achieve a dough with viscoelastic properties. This suggests the existence of a gluten network in crackers. 98 In Manly's chapter dealing with the classification of biscuits, the author says at page 156: The greatest fundamental difference between all the biscuit group areas shown is in the existence or otherwise of long strands of gluten that impart extensibility to a dough. A point comes where due to the shortening action of fat, the softening action of sugars or the mechanical interference action of chrystal sucrose, cohesive gluten cannot be developed so the dough becomes short. … On Fig 15.1 areas 1, bread, pizza bases and crispbreads; 2, water biscuits, matzos and soda crackers; 3, laminated crackers including cream crackers; 4, cabin biscuits; 5, savoury crackers; and 6, semi‑sweet types, all have long chain extensible gluten. The word "extensibility" used by Manly means "elasticity", the same quality mentioned by Dr Quail in his discussion of cracker definitions - "During mixing of cracker dough the aim is to achieve a dough with viscoelastic properties". 99 For the foregoing reasons, I do not accept that the presence of a developed gluten network is a distinguishing feature of Mini Ciabatte.

Sugar 100 The applicants contend that the percentage of sugar shown on the Mini Ciabatte nutritional panel (8.4%) exceeds that for crackers shown in Dr Quail's table of ingredients in his third report (0‑1%). This so called distinguishing feature can be quickly disposed of. The comparison is false. The 8.4% is the amount of sugar in the finished product. Dr Quail's 0‑1% is sugar as an ingredient. The quantity of sugar in the manufacture of Mini Ciabatte is within the range specified by Dr Quail for crackers.

Protein content 101 The applicants note that Mr Walker's analysis shows that the percentage of protein in Mini Ciabatte (10.6%) is consistent with the lower end of Dr Quail's percentage range for crackers (10‑15%). It is nevertheless within the range. I do not regard this as a distinguishing feature of Mini Ciabatte as opposed to cracker.

Appearance 102 One knows from personal experience that savoury biscuits and crackers are generally small, light and thin. The photographs in evidence show Sierra Crackers, Savoy Light, Arnott's Jatz Clix Crackers, Veri Deli Soy & Linseed Crackers and Arnott's Thin Captain Crackers that accord with this description. The Mini Ciabatte is small, thin and light. But unlike some of the products just mentioned, it is not round. It is in the shape of a leaf: 9.5cm long, tapering to a point at each end, with a 3.5cm width. Save for its pointed instead of curved ends, the Mini Ciabatte is elliptical in shape. It is similar in this respect to a Thin Captain cracker, which is oval or elliptical in shape. 103 The Mini Ciabatte is dotted with salt on its top side. In Dr Quail's description of bread, biscuits, crackers, pretzel and wafers, only crackers and pretzels are said to be sprinkled with salt, pretzels invariably and crackers "usually". 104 The Mini Ciabatte is hard and crisp to the touch. It breaks with a distinct crack. Its consistency when eaten is like that of a biscuit, save that it is slightly more chewy. 105 Mini Ciabatte are docked before baking. Dr Quail describes "docking" in relation to crackers as a stamping or perforating operation that is applied to the thin dough sheet as it enters the oven. The examples shown in the photographs (crackers and biscuits) are all docked. In the general description of bread, biscuits, crackers, pretzel and wafers in Dr Quail's third report, only crackers are said to be docked: to prevent the layers of dough from separating and forming air pockets.

Shelf life 106 Dr Quail said Mini Ciabatte has a long shelf life (12 months or more) compared with that of Ciappe. He added that if "shelf life" was the only basis of distinction between biscuits/crackers on the one hand and bread on the other, the Mini Ciabatte would fall into the biscuit/cracker category.

Classification of similar products 107 The applicants relied on the Commissioner's GST‑free classification of products similar to Mini Ciabatte. They urged that this was a relevant consideration when deciding whether Mini Ciabatte was or was not an item 32 product. I do not see my task as being to reach a decision that harmonises the rulings on various similar products or produces a result for Mini Ciabatte that accords with the classification of the product it most resembles. In Bellinz Ltd v Federal Commissioner of Taxation (1998) 38 ATR 350 the taxpayer argued that the court's function was to determine how the Commissioner would, as a matter of fact, apply the tax law to leveraged lease arrangements. It was contended that if the Commissioner's practice was to apply the principles adopted by him in his rulings or practice to arrangements that are not precisely the same as those the subject of the rulings, the court was required to apply the principles even if it was of the view that they were, as a matter of law, wrong. Merkel J rejected the arguments saying at 358: In an appeal under s 14ZZP the Court is to determine the issues by reference to the way in which the relevant tax law would apply to the taxpayer in respect of the relevant years of income in relation to the arrangement the subject of the private ruling. … In my view, on an appeal against an objection decision relating to a private ruling the Court is to approach the matter objectively and is to determine how the tax law would apply to a taxpayer as a matter of law. The issue for the Court is how the Commissioner was obliged to rule on the taxpayer's application for a private ruling, rather than how, as a practical matter, the Commissioner would rule or ought, in accordance with his practice and rulings and the principles on which they were based, rule on the application. The Commissioner's private ruling demonstrates how he "would" rule. The question for the Court is whether that ruling is one which the Commissioner is obliged, in law, to make. In my view that passage, though directed to an appeal against an objection decision relating to a private ruling, is applicable in the present context where the applicants rely on earlier rulings and practices in relation to what they claim are similar products to achieve a consistent result in relation to Mini Ciabatte. My task is to decide whether I am persuaded that Mini Ciabatte is not an item 32 product, in particular (having regard to the way the case was argued), that it is not a cracker. If I am not so persuaded, and that does not sit well with the way the Commissioner has classified a similar product, that may lead him to change his mind about that classification. It will not mean that my decision is wrong.

CONCLUSION 108 Classification decisions for sales tax, GST and VAT purposes are often described as questions of fact and degree (Ferrero at 884), value judgments (Procter & Gamble at [13]), a matter of impression (Procter & Gamble at [19]) and a combination of fact finding and evaluative judgment (Procter & Gamble at [47]). In Procter & Gamble the VAT and Duties Tribunal did not "grade" the relevant factors in coming to its decision. It stood back and took all the factors of appearance, taste, ingredients, process of manufacture, marketing and packaging together in deciding the proper classification of "Regular Pringles". The Court of Appeal approved that approach. Lord Justice Jacob said at [19]: It was not incumbent on the Tribunal in making its multifactorial assessment not only to identify each and every aspect of similarity and dissimilarity (as this Tribunal so meticulously did) but to go on and spell out item by item how each was weighed as if it were using a real scientist's balance. In the end it was a matter of overall impression. 109 Adopting that approach, I am not persuaded that the Commissioner's classification of Mini Ciabatte as an item 32 product was wrong. In my view the Mini Ciabatte is a cracker. Its ingredients are substantially the same as those of a cracker. Having regard to the fact that Mr Abbotangelo said the percentages in the SMP are rough estimates, I have concluded that the ratio of ingredients in the two products is substantially the same. The manufacturing processes are largely the same, except that crackers containing yeast undergo lamination. Crackers can be produced using yeast and can include fermentation stages, as is the case with Mini Ciabatte. The percentage of sugar as an ingredient of Mini Ciabatte is within the range specified for crackers. To the extent that the Italian origin of Mini Ciabatte is relevant to classification under the Act, Mr Muntoni's evidence points towards the product being a cracker. Mini Ciabatte and crackers are put to the same use. The two products are displayed in supermarkets as comparable products. Lansell markets Mini Ciabatte as Italian Flat Bread. However, the supermarkets, who know the local buying scene, treat it and sell it either as a cracker or in the company of crackers and biscuits. I find this a more powerful and independent indicator than the name Lansell attaches to the product. A supplier cannot by a label govern the classification of a product for the purposes of the Act. That is especially so where, as here, the manufacturer's website described the identical product, mini lingue, as a cracker, until asked by Mr Abbatangelo to "correct" the site. The moisture content of dry flat breads (such as Mini Ciabatte) is "quite low and similar to crackers". Mini Ciabatte has an elongated cell structure similar to that of a cracker. Both products have a gluten network. The percentage of protein in Mini Ciabatte is within the range specified for crackers. Mini Ciabatte's appearance (size, weight, docking, salting and thinness) is like that of a cracker. It snaps or cracks like a cracker. Its long shelf life points to it falling into the biscuit/cracker category. 110 For the foregoing reasons the applicants have not established that Mini Ciabatte is not food of a kind specified in item 32 of the table in clause 1 of Schedule 1 of the Act, namely food that is, or consists principally of crackers. 111 The applications are dismissed. I certify that the preceding one hundred and eleven (111) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg.