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[1977] HCA 3
High Court of Australia
1977-07-01
Murphy JJ, Gibbs J
Original judgment source is linked above.
High Court of Australia Barwick C.J. Gibbs, Stephen, Mason, Jacobs and Murphy JJ. Logan Downs Pty Ltd v Queensland [1977] HCA 3
ORDER Demurrer overruled with costs. Order that declarations be made in terms of par. 2 of the plaintiff's amended statement of claim. Defendant to pay plaintiff's costs of the action.
I have had the advantage of reading the reasons for judgment prepared by my brother Mason in this matter. I agree with his conclusion and the reasons he gives for it. The levy is clearly, in my opinion, a tax on the production of goods. It is an excise. I would overrule the demurrer.
The present proceedings are brought by the plaintiff, a grazing company, to challenge the validity of s. 7 of the Stock Act, 1915 Q., as amended, and of certain assessments made and levied thereunder in respect of certain horses, cattle, sheep and swine owned by the plaintiff. In each case the assessment was made at specified rates per head of such stock. The contention of the plaintiff is that s. 7 attempts to impose a duty of excise contrary to s. 90 of the Constitution. In the course of argument before us counsel for the plaintiff intimated that he did not press the submission that the assessments were invalid in so far as they were made in respect of the horses.
The words of the first paragraph of s. 7 are as follows:
The Minister may in respect of each year (and whether before or after the commencement of the year in question) make and levy an assessment, at rates to be fixed by him, on each and every owner of stock and, subject as hereinafter provided, each and every such owner shall in each year pay, in respect of stock owned by him, that assessment. Later paragraphs of the section provide that the amount of any assessment is a debt due to the Crown and recoverable accordingly and that in addition failure to pay the assessment shall be an offence.
Until 19th April 1973 s. 7 contained a second paragraph which provided that the rates fixed by the Minister should not exceed the scale set out in the section, by which a specified rate per head was fixed respectively in respect of cattle, horses, cattle and horses together, sheep and swine. This paragraph was repealed by the Stock Act and Other Acts Amendment Act, 1973 and the discretion of the Minister to fix the rate at which an assessment is made appears now to be quite unfettered. However, this remarkable abdication by the Legislature of its power to control the imposition of taxation does not assist the present challenge.
The second paragraph of s. 7 was followed by a proviso, which remains in the section notwithstanding the repeal of the paragraph itself. This provides (inter alia) that a person who owns both cattle and horses shall be assessed by aggregating their numbers, and that an assessment shall not be payable by an owner in respect of cattle, or horses, or cattle and horses, or sheep if the number thereof owned by him is less than eleven. It further fixes (in small lump sums) the minimum assessments to be payable respectively in respect of eleven or more sheep, or cattle, or horses, or cattle and horses, or in respect of any swine, owned by one owner.
The assessment levied under s. 7 is to be paid into a fund at the Treasury called the "Stock Fund": s. 6 (5), (1). The Fund may be supplemented by grants made to it out of Consolidated Revenue at a rate not exceeding two dollars for every dollar paid into the Fund during the twelve months preceding the grant in respect of assessments levied and paid under the Act: s. 6 (4). The Act provides that the Stock Fund shall (subject to an immaterial exception) "be applied to the payment of all expenses incurred by the Governor in Council or the Minister in the execution of this Act as well as to the provision of such husbandry services to the cattle, sheep, and pig industries and to such other animal industries as the Minister may from time to time determine": s. 6 (1). The word "stock" is declared by s. 3 to have the following meaning unless the context otherwise indicates:
"Stock" includes horses, cattle, sheep, swine, camels, dogs, cats, poultry and goats, and any other animals whatsoever which the Governor in Council, by Order in Council, from time to time declares to be stock for the purposes of this Act. However, it was made clear by the paragraph since repealed, and is still true, that s. 7 applies, not to all stock as defined in s. 3, but only to cattle, horses, sheep and swine. Section 5A, which provides for the making of stock returns which s. 7 requires to be used for the making of assessments under that section, uses "stock" in the same limited sense. However, having regard to the context of s. 6 it does not seem possible, as a matter of construction, to limit the words "animal industries" to industries concerned with the stock to which s. 7 refers. The only such stock not expressly mentioned in s. 6 are horses. "Animal" is defined in s. 3 to include a bird, and it would appear that the Stock Fund might be applied to the provision of husbandry services to animal industries other than those concerned with cattle, sheep, swine and horses - for example, to the poultry industry. However, that question is not crucial and I need not finally determine it. It is clear that the expenses incurred in the execution of the Act may have no relation whatever to the stock in respect of which an assessment may be made under s. 7. For example, the expenses may relate to the administration of the provisions regarding boarding kennels (s. 26B) or pet shops (s. 26D), which may be of no concern whatever to an owner of sheep or cattle. Similarly, the husbandry services provided out of the Fund may not in fact benefit in any way a particular owner of stock who pays the levy.
The word "owner" is given an extended meaning by the definitions contained in s. 3 and s. 5A, although the former is wider in scope than the latter. It is unnecessary to consider the effect of these definitions in any detail. It is enough to say that if the tax is imposed on the agent of or superintendent or manager for the owner, or upon any person in charge of stock, as well as upon the true owner, all that is said hereafter in relation to the position of an owner in the true sense is equally applicable to the other persons liable to the tax.
There is no doubt that s. 7 imposes a tax. "It is a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered": Matthews v. Chicory Marketing Board (Vict.) [7] , cited in Brown's Transport Pty. Ltd. v. Kropp [8] . The amount levied does not purport to be, and is not in fact, a payment for services rendered to the person required to pay it. The Stock Fund is no doubt applied for purposes which are beneficial to farmers and graziers generally, but no particular service or benefit need be rendered to any owner of stock who is required to pay an assessment, and if, by coincidence, the person liable to pay an assessment has been rendered some service under the Act, the assessment is not payable because that service has been performed, and bears no necessary relation to the expenditure incurred in providing that service. In this respect the case is similar to Parton v. Milk Board (Vict.) [9] and Swift Australian Co. (Pty.) Ltd. v. Boyd Parkinson [1] . On the other hand Harper v. Victoria [2] , where the fee was regarded as a charge for particular services rendered to the person required to pay it, is distinguishable from the present case.
The impost is not only a tax; it is in my opinion a tax on goods, because the person taxed is charged by reason of, and by reference to, the fact that he is the owner of the stock. But that is not enough to make it an excise. Not every tax on goods is an excise. For example, a tax on the consumption of goods is not an excise: Dickenson's Arcade Pty. Ltd. v. Tasmania [3] . In Bolton v. Madsen [4] , in the joint judgment of the Court, it was said [5] : "It is now established that for constitutional purposes duties of excise are taxes directly related to goods imposed at some step in their production or distribution before they reach the hands of consumers." Their Honours went on to say that "it is the criterion of liability that determines whether or not a tax is a duty of excise" [5] . They adopted the formulation which Kitto J. had made in Dennis Hotels Pty. Ltd. v. Victoria [6] , namely that "a tax is not a duty of excise unless the criterion of liability is the taking of a step in a process of bringing goods into existence or to a consumable state, or passing them down the line which reaches from the earliest stage in production to the point of receipt by the consumer" [7] . Since that decision conflicting opinions have been expressed as to whether the criterion of liability under the statute imposing the tax, or the practical effect of the legislation, is determinative of the question whether the tax is a duty of excise. I accept the former view, although as I endeavoured to explain in Dickenson's Arcade Pty. Ltd. v. Tasmania [8] that does not mean that the name given to the tax by the taxing statute, or the form of the provisions of that statute, will be decisive; it is still necessary to determine the legal effect of those provisions according to their proper construction. Although, as will appear, this view would in my opinion conclude the present case in favour of the validity of the statute, it is not necessary to decide the matter on that ground or to engage in further discussion of the importance of the criterion of liability. The difference of opinion that exists as to the importance of the criterion of liability has not extended to the other statements made in Bolton v. Madsen [9] . The description there given of the nature of an excise has since been regarded as authoritative. It would be superfluous to multiply authority on this point, since in Dickenson's Arcade Pty. Ltd. v. Tasmania [8] the majority of the members of the Court have so recently treated Bolton v. Madsen as correctly explaining the nature of duties of excise: particularly [10] and also [11] .
The passages from the judgment in Bolton v. Madsen [9] that have been so approved establish that to be an excise the tax must be imposed at some step in the production or distribution of goods. The step may be the production or manufacture itself, or it may be something done to make goods already in existence fit for sale or consumption, or it may be the sale of the goods or their distribution by other means. But if what is taxed is not some step in the process which begins with the production of the goods and ends with their receipt by the consumer it will not be an excise. If the tax is imposed by reason of, or by reference to, the fact that the taxpayer is the "producer, manufacturer, processer, seller or purchaser" of goods the duty may be one of excise (see Brown's Transport Pty. Ltd. v. Kropp [12] ). However, mere ownership cannot properly be described as the taking of any step in the production or distribution of goods, and in the many cases in which s. 90 of the Constitution has been discussed it has never been held that a tax imposed on the ownership of goods without more is a duty of excise.
It would, I think, be obvious enough that a tax on the ownership of goods not held for commercial purposes would not be a duty of excise. For example, a tax on the domestic furniture owned by the taxpayer would not answer that description, and if the tax in Dickenson's Arcade Pty. Ltd. v. Tasmania [13] had been imposed upon the ownership of tobacco by the consumer it would still not have been an excise. Similarly a tax on the gift of chattels would not be an excise. Further, in my opinion a tax on the ownership of goods used for the purpose of the production of articles of commerce, but not themselves intended to be passed on to consumers, would not be an excise. For example, a tax on plant or tools of trade owned by manufacturers or their employees, or on agricultural implements owned by farmers, would not be an excise. Such taxes would not affect the goods taxed "as the subjects of manufacture or production or as articles of commerce", to use the words of Dixon J. in Matthews v. Chicory Marketing Board (Vict.) [14] . Equally, in my opinion, a tax on the ownership of goods which are intended to be sold will not, at least as a general rule, be an excise. If on the proper construction of the statute the tax is imposed by reference to the ownership and not by reference to any sale or intended sale or distribution of the goods, it cannot be said that the tax is attracted by the taking of any step to bring the goods into existence or to move them along the line from production to consumption, and such a tax would affect the goods, not as the subjects of manufacture or production or as articles of commerce, but simply as the subjects of ownership.
It is now necessary to return to consider the nature of the tax imposed by s. 7 of the Act. A tax is imposed by reference to the number of stock owned at 1st January in each year; s. 7 provides that the returns made under s. 5A shall be used as a basis for the assessment, and s. 5A (2) requires the return to show stock kept or depastured on that date. It will thus be seen that a particular head of stock may be taxed several times (since if a beast is held for a number of years it will be taxed each year) or not at all (as when it is bought after 1st January in one year and sold before 1st January in the next). Further, the tax is imposed without any reference to the purpose for which the stock are kept. The plaintiff's horses were in fact stock horses, but so far as the Act is concerned that is irrelevant. The tax is borne by cattle or swine which are held for the purpose of breeding as well as by those which are held to be fattened and prepared for sale. Sheep kept for growing wool bear the tax equally with those kept to produce meat.
A tax on cattle kept for breeding purposes, or on sheep kept for wool-growing, is not in my opinion an excise. The cattle or the sheep are not in themselves at that stage articles of commerce; they are used to produce what may become articles of commerce - progeny or wool. The animals themselves are no more articles of commerce than the milking machine or wool-press owned and used by the farmer or grazier. It is true that the cattle or sheep may become unsuitable for breeding or wool-growing and may then be sold - just as machines may become obsolete and traded in - and they may at that time become articles of commerce. However, they have not that character when they are taxed. Moreover, it is not, in my opinion, possible to say that the tax on the ownership of the cattle or sheep is in substance a tax on the progeny or on the wool. Some reliance in the present case was placed on the decision in Matthews v. Chicory Marketing Board (Vict.) [15] . In that case it was thought possible by the majority of the Court to hold that a levy on producers for every half-acre of land planted with chicory was a levy on the production of chicory. It must, however, be remembered that the legislation there considered authorized a levy to be made only on producers and the levy in fact was expressed to be on producers [16] . Dixon J. said [17] :
The levy made by the Chicory Marketing Board is not ascertained by direct reference to the quantity or value of the chicory produced. It is imposed upon a producer, and presumably under the definition of that word he must actually obtain some chicory from the crop he has sown before he satisfies that description. But the basis of his assessment is not what he garners but what he plants. By calculating the levy upon the number of half acres which the producer plants with chicory the board makes it at least theoretically possible that owing to a failure of his crop the levy upon him has little or no relation to his actual production of chicory. But the basis adopted for the levy has a natural, although not a necessary, relation to the quantity of the commodity produced. 1. (1938) 60 C.L.R. 263. 2. (1938) 60 C.L.R., at pp. 282, 284, 288. 3. (1938) 60 C.L.R., at p. 303.
He concluded that the tax was a tax upon production and that it was not prevented from being a duty of excise because the basis of assessment was not strictly that of quantity or value [18] . That case is in my opinion distinguishable from the present where the tax is not imposed on producers; it falls upon an owner whether or not he intends to use his stock for the purpose of production and whether or not anything is actually produced. And a tax imposed, for example, on all sheep owned has no natural relation to the quantity of wool produced, when some of the sheep - perhaps most or all of them - are kept for purposes other than the production of wool.
Those animals which are kept for the purposes of sale are of course articles of commerce. However, the tax does not affect them in that capacity. They are taxed because they exist, not because any step is taken in their production or distribution.
If the criterion of liability under the Act is decisive it is clear that the tax is not an excise, for the Act pays not the slightest regard to the question whether any step is taken by the taxpayer to bring into existence or into a consumable state the stock itself or its products or progeny, or to pass the stock or its products or progeny down the line in the direction of consumption. But even if, contrary to my opinion, regard may be had to the substantial or practical effect of the legislation, it cannot properly be said that the Act has the effect of imposing a tax at some point in the production or distribution of the stock. The answer to the contention that the tax is not an excise is not simply that the Act casts the burden of the imposition on the owners of all stock whether the animals are articles of commerce or not, but that the tax, in its nature and, if that matters, in its practical effect, is not a tax on any step taken in the process that begins with the production of the stock and ends with its sale to the consumer.
It would, in my respectful opinion, be going beyond the settled conception of an excise, and beyond any decision so far given, to hold that a tax on the ownership of stock, irrespective of the purpose for which it is owned or kept, is an excise. The limitation on the power of the States which is effected by s. 90 does not extend to legislation of the kind now in question.
For these reasons I regard s. 7 of the Act, and the assessments made under it, as valid. I would allow the demurrer.
For many years Queensland legislation, the Stock Acts, has required the owner or person in charge of livestock to furnish an annual return of stock and has authorized the making of assessments in respect of such stock. The proceeds go to a Fund, since 1953 called the Stock Fund, and are applied in defraying the costs of execution of the legislation and in the provision of animal husbandry services.
The power to make assessments is, by s. 7 of the Act, conferred upon a designated Minister of the Crown; he may annually "make and levy an assessment, at rates to be fixed by him, on each and every owner of stock", who is to pay that assessment "in respect of stock owned by him" but subject to certain qualifications concerned with the fixing of minimum and maximum rates and of differing rates for various kinds of stock.
"Stock" is defined in s. 5A (i) of the Acts to mean "any one or more horses, cattle, sheep, or swine, and includes foals, calves, lambs and pigs". Although this sub-section begins with the words "In this section", thereby seeming narrowly to confine the application of the definition, the terms of s. 7, which confers the power of assessment, are, I think, such as to require "stock", where there used, to be understood in this defined sense rather than in the much wider sense given to "stock" by s. 3 of the Acts, where it is generally defined as extending to camels and goats and any other animals declared to be stock, dogs and cats having been so declared for many years.
The plaintiff, a Queensland grazing company, was, in each of the years 1972, 1973 and 1974, assessed under the Acts in respect of stock owned by it. It refused to pay the amounts so assessed and contends that the assessments involve the imposition of duties of excise contrary to s. 90 of the Constitution and are accordingly unlawful, the legislation being to that extent ultra vires.
The amounts which have been assessed are neither charges for services rendered or to be rendered nor are they in the nature of licence fees exacted as the price of being permitted to engage in a particular business. They are exactions having the character of a tax and they are levied upon the plaintiff as the owner of stock, being computed by reference to the number and type of stock which it owns. They are thus directly related to the plaintiff's stock and are in this sense a tax upon those stock. All this suggests, consistently with the authorities in this Court, that the amounts are indeed duties of excise, as the plaintiff contends.
However, it is not every tax upon goods which will be an excise. It is not simply the taxing of goods that distinguishes the incidence of an excise duty from that of other taxes; it is rather the taxing of goods during the process by which they are first brought into existence and then ultimately pass to the consumer or user. A tax upon the ownership of goods after that process is at an end, the goods having come to the hands of the ultimate user, is no duty of excise. Once out of the stream of production and distribution, goods cease to be apt subject-matter for duties of excise and it is this that accounts for the character of an excise as an indirect tax; being imposed upon goods in the particular way it is, its incidence will tend to be passed on in the price of the goods, as they flow along the stream of production and distribution to the end user. But a tax upon goods which have reached the hands of the ultimate consumer will, on the contrary, impose a quite direct form of taxation upon their owner. The goods will not pass out of his hands, bearing with them, as a component of their price, the tax imposed upon them; instead the tax will lie where it falls, upon the owner. It will thus lack the quality of a duty of excise and be a direct tax upon the owner, the goods only providing the means of identifying the person to be taxed.
What then of the livestock in the present case? Are they goods in the stream of production and distribution so that to tax them is to impose an excise, or have they reached the hands of the ultimate consumer so as no longer to be capable of being the subject of a duty of excise? Or, again, are they such as never to become articles of commerce capable of being the subject-matter of duties of excise? Livestock, animals domesticated by man and serving his ends, are not easily fitted into this concept of the stream of production and distribution; it is not easy, in relation to them, to answer the question that naturally arises when the existence of a duty of excise is in issue, "What is it which is being taxed, what is the subject of the excise?". Livestock have a variety of uses for man. Their flesh and that of their progeny provide food and in that respect the beasts themselves while living may be regarded as articles of commerce in the course of production, their parts ultimately becoming meat, leather and the like. Again some livestock perform work as beasts of burden, as do horses and oxen. Others produce distinct articles of commerce, such as milk and wool. Thus when stock, as here defined, are taxed it cannot be said, without knowing much more of individual cases, what, if any, goods it is which, in the stream of production and distribution, are being subjected to a duty of excise.
The facts of the present case illustrate the point: during the relevant years the plaintiff owned large numbers of sheep and cattle, some pigs and some stock horses; the cattle were kept for fattening and sale for meat, or for breeding and only ultimately for sale for meat; the pigs for fattening for sale, some sows being used for breeding purposes and only ultimately being sold for meat; the sheep were kept for their wool and sooner or later for sale for meat. The stock horses were for use in working the plaintiff's properties.
The present exaction cannot be an excise so far as it relates to the plaintiff's stock horses; they are in no sense themselves goods in the stream of production and distribution; since they do not appear to be used for breeding purposes it cannot be argued that to tax them is to tax, as articles of commerce, their progeny in the course of production.
Of the remaining stock all will ultimately be converted into beef, pork, mutton and all the products of the tannery and fellmongery; in that sense they are themselves articles of commerce in the stream of production. The sheep also occupy another and rather different position, they are themselves productive units, producing wool which is an article of commerce; were any of the plaintiff's cattle dairy cows, which they are not, the same could no doubt be said of their milk. To the extent that some of the stock is used for breeding purposes, the progeny being articles of commerce, such stock may again be seen as productive units.
To tax an owner of livestock by reference to his beasts when he grows them so that he may sell them for their meat and the other products of their carcasses, the incidence of the tax being as provided by the present Acts, is in my view to impose a duty of excise. The tax has at least a "natural", although not perhaps always a "necessary", relation to the quantity of the commodities produced and is upon an essential step in production (Matthews v. Chicory Marketing Board (Vict.) [19] ). It directly affects those commodities while they are in the line which reaches from the earliest stage in production to the point of receipt by the consumer (Dennis Hotels Pty. Ltd. v. Victoria, per Kitto J. [20] ). It is a tax directly related to those commodities and imposed at some step in their production before reaching the hands of consumers (Bolton v. Madsen [21] ).
The fact that, while the plaintiff's sheep fall within the scope of the tax, many of them are raised primarily for their wool and not for meat production, so that they play the role of producers of a commodity rather than representing a commodity itself in the course of production, does not, in my view, prevent the present tax from being, in respect of them, a duty of excise. If the sheep's quite secondary role as ultimately yielding meat be disregarded, a tax directly related to them will nevertheless, in my view, answer the description of an excise duty upon their wool. Likewise in the case of some of the plaintiff's cattle and pigs; their primary use is for the purpose of breeding progeny. Once again I see no reason to distinguish the tax imposed in respect of such animals from that applicable to those raised primarily for their meat. In all cases the tax is directly related to the particular animal and, hence, to the particular commodity, be it meat, wool or progeny, for the production of which that animal is being used.
It is, of course, a peculiarity of the present case that a reading of the Acts will not disclose upon what articles of commerce, whether upon meat, wool, milk, etc., the duty of excise is intended to fall; moreover the operation of the Acts will not produce any uniform rate of duty in respect of any particular commodity, indeed quite the contrary. Thus in a particular year of assessment one ewe may lamb, be shorn and then be sold offshears for its mutton and will attract the same amount of duty as another ewe which is merely shorn and is retained in the flock for the next season. But this eccentricity of incidence is in itself no sufficient reason for denying to the tax its character of an excise. In Western Australia v. Chamberlain Industries Pty. Ltd. [22] legislation which, as Walsh J. pointed out in his dissenting judgment [23] , resulted in very marked absence of uniformity in the incidence of duty was nevertheless held by a majority of this Court to impose duties of excise. In Anderson's Pty. Ltd. v. Victoria [24] the Chief Justice observed that the fact that the duty there in question was not imposed generally upon some definable category or class of goods was not in itself a reason for denying that the duty was an excise.
This Court's decision in the Chamberlain Industries Case [23] also disposes of any suggestion that because the tax imposed by the legislation will not in every instance be a duty of excise, for example in the case of the plaintiff's stock horses, that should lead to the conclusion that it is not in any instance void as imposing a duty of excise: see esp. per Barwick C.J. [25] .
It is for these reasons that I conclude that the demurrer should be overruled. I would make declarations as sought in par. 2 of the plaintiff's statement of claim; these declare the assessments made on the plaintiff, insofar as made in respect of its cattle, sheep and swine, to be the imposition of duties of excise, declare s. 7 of the Acts to be, to the like extent, beyond power, and declare as to each of the three annual assessments that the plaintiff is not obliged to pay them insofar as made in respect of those three categories of stock.
By s. 7 of the Stocks Acts, 1915 to 1965 Q., before they were amended by the Stock Act and Other Acts Amendment Act, 1973, the Minister administering the Act was empowered, in respect of each year, to "make and levy an assessment, at rates to be fixed by him, on each and every owner of stock and, subject as hereinafter provided, each and every such owner shall in each year pay, in respect of stock owned by him, that assessment". The section then went on in its second paragraph to provide:
The rates as fixed by the Minister of an assessment as aforesaid shall not exceed the following scale, that is to say: -
Description of Stock Rate (i) Cattle Subject to paragraph (b2) of the proviso hereto, a rate of not more than ten cents on every head (ii) Horses (iii) Cattle and horses together (iv> Sheep Subject to paragraph (b1) of the proviso hereto, a rate of not more than two and one half cents on every head (v) Swine Subject to paragraph (b3) of the proviso hereto, a rate of not more than two and one half cents on every head
By the 1973 amendment the Minister for Primary Industries was designated as the Minister charged with the administration of the Act. By the same amendment the second paragraph of s. 7, which prescribed that the rates as fixed by the Minister should not exceed the scale set out above, was repealed. Certain amendments were made to the proviso in s. 7 which now appears at the end of the first paragraph in the section. As amended the proviso reads:
(a) In every case where one and the same owner owns both cattle and horses an assessment as aforesaid shall be deemed to be made and levied on that owner in respect of those horses and cattle together and the amount of the assessment payable in respect of those stock by that owner shall be ascertained by aggregating the respective numbers of cattle and horses;
(b) An assessment as aforesaid shall not be payable by an owner in respect of cattle, or horses, or cattle and horses, or sheep, if the number thereof owned by him is less then eleven;
(b1) The minimum assessment payable in respect of eleven or more sheep owned by any owner shall be $2.
(b2) The minimum assessment payable in respect of eleven or more cattle, or horses, or cattle and horses owned by any owner shall be $4.
(b3) The minimum assessment payable in respect of swine owned by any owner shall be $2.
(c) The Governor in Council may by Order in Council reduce the rates of or wholly remit any assessment as aforesaid.
The statutory definition of stock contained in s. 5A, which is the relevant definition for present purposes, is in the following terms:
"Stock" - means any one or more horses, cattle, sheep, or swine, and includes foals, calves, lambs, and pigs.
Section 5A also defines "owner of stock" in the following terms:
"Owner of stock" - means the owner, whether jointly or severally, of stock or the authorised agent of or the superintendent or manager for the owner of stock or the person in charge of stock.
Section 6 makes provision for the establishment of the "Stock Fund" in the following terms:
(1) There shall be established at the Treasury a fund to be called the "Stock Fund" which, subject to the provisions of subsection three of section 6A of this Act, shall be applied to the payment of all expenses incurred by the Governor in Council or the Minister in the execution of this Act as well as to the provision of such husbandry services to the cattle, sheep, and pig industries and to such other animal industries as the Minister may from time to time determine.
(4) Endowment. The Governor in Council may, in any year in which he deems it necessary and proper so to do, make a grant in aid of the Stock Fund out of Consolidated Revenue (which is hereby appropriated for the purpose) in such sum as the Governor in Council may approve.
Any such grant when so made shall be at a rate not exceeding £2 for every $1 paid into the Fund during the twelve months preceding such grant in respect of assessments levied and paid under this Act.
(5) All assessments levied and other moneys received and all penalties recovered under this Act shall be paid into the Fund.
The plaintiff company has been assessed to tax under s. 7 in amounts totalling $4,314.81 in respect of the years commencing 1st January 1972, 1973 and 1974, the assessments being made in respect of horses, cattle, sheep and swine depasturing on the plaintiff's three grazing properties in Queensland. In this connexion the plaintiff seeks a declaration that s. 7 is invalid on the ground that it imposes a duty of excise in contravention of s. 90 of the Constitution and a further declaration that the plaintiff is not under any liability to pay the amount of the assessments. To the plaintiff's statement of claim the defendant has demurred on the ground that s. 7 is valid.
The resolution of the issue raised by the plaintiff's claim to relief and the demurrer turns in my mind upon the decision of this Court in Matthews v. Chicory Marketing Board (Vict.) [26] and the extent of the authority which it now has when it is considered in the light of more recent decisions such as Dennis Hotels Pty. Ltd. v. Victoria [27] ; Bolton v. Madsen [28] ; Dickenson's Arcade Pty. Ltd. v. Tasmania [29] and the principles which underlie these decisions.
In Matthews' Case [26] the Marketing of Primary Products Act 1935 Vict. authorized the making by marketing boards of levies on producers. The Chicory Marketing Board appointed under the Act made a levy on producers of £1 for every half acre of land planted with chicory. The tax was imposed upon the producers of chicory and became payable by reason of the planting of the land, irrespective of the actual production of the product. The amount of the tax payable took no account of the variation in yield which did occur between areas planted with chicory. None the less it was held that the tax was an excise because planting was an essential step in production and because the tax was imposed on planting. The consequence was that it was a tax on the production of goods.
The levy made by the Chicory Marketing Board is not ascertained by direct reference to the quantity or value of the chicory produced. It is imposed upon a producer, and presumably under the definition of that word he must actually obtain some chicory from the crop he has sown before he satisfies that description. But the basis of his assessment is not what he garners but what he plants. By calculating the levy upon the number of half acres which the producer plants with chicory the board makes it at least theoretically possible that owing to a failure of his crop the levy upon him has little or no relation to his actual production of chicory. But the basis adopted for the levy has a natural, although not a necessary, relation to the quantity of the commodity produced. Although many other factors go to the determination of the actual quantity of chicory produced, the area planted is, if not the chief, at all events a controlling element. it has placed upon an essential step in production, namely, planting, an impost computed quantitatively. 1. (1938) 60 C.L.R., at p. 303.
Matthews' Case [26] was distinguished in Bolton v. Madsen [31] , where the Court referred to the passage from the judgment of Dixon J. in Matthews' Case [32] which I have already quoted and pointed out that the permit fee in Bolton v. Madsen [33] itself was such that the tax was independent of the weight or quantity carried and, accordingly, lacked a sufficiently direct relationship with production to constitute a tax on production. Consequently the permit fee was not an excise. It may be safely concluded, then, that the decision in Matthews' Case was accepted by the Court when it came to expound the criterion of liability according to which Bolton v. Madsen itself was actually decided. See also Anderson's Pty. Ltd. v. Victoria, per Menzies J. [34] .
It will be recalled that in Bolton v. Madsen the Court said [35] :
It is not enough that Turner, the owner-carrier, could by a simple calculation determine the cost to him per bale of carrying his wool from his station to the wool store for sale. It is not enough because it is the criterion of liability that determines whether or not a tax is a duty of excise. The tax is a duty of excise only when it is imposed directly upon goods or, to put the same thing in another way, when it directly affects goods, and to establish no more than that its imposition has increased the cost of putting goods upon the market by a calculable amount falls short of establishing the directness of relation between the tax and the goods that is the essential characteristic of a duty of excise. Later it said [36] : If there were a law imposing liability to pay fees for permits to carry a person's own goods upon his own vehicle without more, it could not be said that the criterion of liability is "the taking of a step in a process of bringing goods into existence or to a consumable state, or passing them down the line which reaches from the earliest stage in production to the point of receipt by the consumer", to adopt the formulation which Kitto J. made in Dennis Hotels Pty. Ltd. v. Victoria [37] . 1. (1963) 110 C.L.R., at p. 271. 2. (1963) 110 C.L.R., at p. 273. 3. (1960) 104 C.L.R., at p. 559.
If an unqualified and universal operation were to be conceded to these observations there might conceivably be some basis for thinking that Matthews' Case [38] represents an island or Alsatia in the law of s. 90 which should not be extended. However, the recent decisions of the Court in Dickenson's Arcade Pty. Ltd. v. Tasmania [39] and M. G. Kailis (1962) Pty. Ltd. v. Western Australia [40] have clearly established that the criterion of liability formulated in Bolton v. Madsen [41] has a limited application and that a sufficiently direct relationship between the tax and the goods may be established in circumstances where it is not possible to demonstrate that the imposition has increased the cost of goods to a purchaser by a calculable amount. In particular this is the case where it appears that the tax may be characterized on other grounds as a tax imposed on production or on an essential step in production. See Kailis' Case [40] where there was a prohibition against processing without a licence, the licence fee payable being calculated by reference to the quantity of materials used in processing in a period ending before the commencement of the period for which the licence is granted. The reason for refusing to accord to the criterion of liability expressed in Bolton v. Madsen [41] a universal application has been expressed elsewhere, but these expressions may be traced back to the remarks which Dixon J. made in Matthews' Case [42] :
If the word "excise" received a meaning which confined its application to taxes the relation of which to the commodity concerned was of some narrow and strictly defined nature, as, for instance, by an arithmetical relation to quantity, it would not only miss the principle contained in the use of the word "excise," but it would expose the constitutional provision made by sec. 90 to evasion by easy subterfuge and the adoption of unreal distinctions. To be an excise the tax must be levied "upon goods," but those apparently simple words permit of much flexibility in application. The tax must bear a close relation to the production or manufacture, the sale or the consumption of goods and must be of such a nature as to affect them as the subjects of manufacture or production or as articles of commerce. But if the substantial effect is to impose a levy in respect of the commodity the fact that the basis of assessment is not strictly that of quantity or value will not prevent the tax falling within the description, duties of excise. 1. (1938) 60 C.L.R. 263. 2. (1974) 130 C.L.R. 177. 3. (1974) 130 C.L.R. 245. 4. (1963) 110 C.L.R. 264. 5. (1974) 130 C.L.R. 245. 6. (1963) 110 C.L.R. 264. 7. (1938) 60 C.L.R., at p. 304.
Quite apart from what has been decided and what has been said in Dickenson's Arcade [39] and Kailis [40] , it needs to be emphasized that Dennis Hotels [43] , Bolton v. Madsen [41] and for that matter Dickenson's Arcade (to the extent to which it related to the licensing fee) were cases involving impositions levied at a time when goods were in course of sale or distribution, after the process of manufacture or production had been completed. It has always been recognized that before these impositions can be characterized as an excise a direct relationship between the tax and the goods must be shown. Such a relationship between the tax and the goods must also exist, so it is said, when the tax is levied at a time when the goods or the commodity is in course of production, but it may be said that in such a case the relationship between the tax and the goods and therefore the relationship between the tax and "home production or manufacture" is more easily perceived. The existence of the two classes of case and the ultimate necessity of relating the tax to "home production or manufacture" was expressed by Kitto J. in a judgment with which Taylor J. agreed in Anderson's Pty. Ltd. v. Victoria [44] :
A tax must necessarily be made payable by a person; but it is not a duty of excise unless the criterion of the person's liability is the fact that some act of his possesses the quality of a contribution either to the physical character of goods as subjects of commerce or to the sequence of events which results in their being available, as in the hands of a consumer, to be put to their ultimate purpose. The reason is that a duty of excise is, at bottom, a burden upon home production or manufacture. Obviously it is such a burden if it is payable upon a step in production or manufacture in its character of such a step. Not so obviously but just as certainly, it is such a burden if it is payable upon a step in distribution in its character of such a step; for in that case from the time the goods come into existence the law makes it inherent in their nature, as goods requiring distribution in order to become available to fulfil their purpose, that the tax shall be paid. 1. (1974) 130 C.L.R. 177. 2. (1974) 130 C.L.R. 245. 3. (1960) 104 C.L.R. 529. 4. (1963) 110 C.L.R. 264. 5. (1964) 111 C.L.R., at p. 374.
As I see it, then, the decision in Matthews' Case [45] remains unaffected by the more recent decisions of the Court. The question remains whether it governs the instant case.
In this case the tax is imposed on the "owner" and "in respect of stock owned by him". A tax on the ownership of livestock is a tax on livestock and at least to the extent that it is a tax on livestock used for their product, that is, for the production of meat, milk, wool and other commodities and for breeding purposes, it is, in my opinion, a tax on production itself for it is an addition to the cost of production and it has a natural, though not a necessary, relation to the quantity or value of what is produced. Although it cannot be shown that the tax which is imposed at rates which vary as between different kinds of livestock, results in a calculable increase in the cost or value of a particular commodity because the quantity and value of commodities yielded by animals fluctuates, influenced as it is by many factors, it is none the less true to say that the tax has a natural relation to the quantity or value of the commodity ultimately produced. This relation is as direct as the relation which the tax on the chicory had to the chicory which was ultimately produced in Matthews' Case. That decision therefore governs the present case.
The tax does not cease to be a tax on ownership because the definition of "owner of stock" includes persons who are not the owners of stock, that is, the agent, superintendent, manager or person in charge of stock. It is enough that owners of stock are included and that the Act therefore authorizes the imposition of a tax on the owner in respect of his ownership of livestock used for production in the sense explained above.
The fact that the statutory definition of stock in s. 5A includes some animals, e.g. horses and foals, which are not usually used or kept for production, is of no relevance. If the tax otherwise has the character of an excise in its application to stock used for production, it does not lose this character merely because in its application to other animals it may not constitute an excise.
It was pointed out that s. 6 authorizes the application of the stock fund in payment of the cost of administration of the Act and in the provision of husbandry services to the cattle, sheep and pig industries and to such other animal industries as the Minister, from time to time, may determine. Consequently, the Act does not permit the application of revenue raised by the tax for the general purpose of consolidated revenue. However, the Marketing of Primary Products Act contained a somewhat similar provision which authorized the application of the moneys raised by means of the imposition of the tax in the administration of a compulsory pool for the marketing of chicory and other connected purposes. None the less the imposition was held to constitute an excise. To the same effect was the decision in Parton v. Milk Board (Vict.) [46] . The same conclusion must be reached here.
For these reasons I would overrule the demurrer and declare that s. 7 of the Act is invalid to the extent to which it authorizes the imposition of a tax in respect of stock used for production, and that the plaintiff is under no liability to pay the assessments which have been made except in so far as they relate to horses owned by the plaintiff, these horses, it is admitted, not being used for production.
The Stock Act, 1915 Q., as amended, requires by s. 5A (2) that every owner of stock shall within one month after 1st January in each year make a return in the form prescribed of the number and description of all stock kept or depastured in any Local Authority Area upon that 1st January. Section 5A (1) contains the following definitions.
Meaning of " owner of stock " and " stock ". In this section -
"Owner of stock" - means the owner, whether jointly or severally, of stock or the authorised agent of or the superintendent or manager for the owner of stock or the person in charge of stock; and
"Stock" - means any one or more horses, cattle, sheep, or swine, and includes foals, calves, lambs, and pigs.
"Local Authority" is defined in s. 3 and means broadly any local government body as constituted by various statutes. By s. 6 the "Stock Fund" is established. Its funds are to be applied to the payment of expenses incurred in execution of the Act as well as to the provision of husbandry services. Section 6 (5) provides that "All assessments levied and other moneys received and all penalties recovered under this Act shall be paid into the Fund". By s. 7 the Minister may in respect of each year make and levy an assessment at rates fixed by him on each and every owner of stock and each owner is required in each year in respect of stock owned by him to pay the assessment. Cattle and horses are aggregated in number for purposes of assessment. There are certain minimum numbers and amounts. Sections 8 and following provide for the establishment of dips, experimental stations, quarantine stations, health certificates and restrictions on entry of stock, destruction of uncertified stock, prohibition of movement of infected stock, protected and quarantine areas, destruction of infected stock, muster and destruction of "brumbies", restrictions on travelling stock, notification of diseases and associated matters. There are also provisions regulating artificial insemination, and the keeping of kennels and pet shops.
The plaintiff at the material times carried on a grazing business on certain properties in Queensland. It was the owner within the meaning of s. 5A of certain horses, cattle, sheep and swine upon those properties and liable under s. 7 to assessment in respect of that stock owned by it. The plaintiff claims that the assessment is a duty of excise and cannot therefore be validly imposed by the State of Queensland.
Although every excise duty is a tax on or in respect of goods, it does not follow that every tax on or in respect of goods is an excise duty. Something more is required. In order that a tax on or in respect of goods can be characterized as an excise duty the tax must be imposed at a stage, or in the course of the movement of the goods as merchandise or commodities from production or manufacture to ultimate consumption. I use the latter word to cover not only physical consumption but also consumption by continuing use of chattels privately or in business. As well as the tax being one imposed at a stage or in the course of the progress of the goods as commodities from production or manufacture to ultimate consumption the tax must have a further characteristic which is not easy to express in any comprehensive formula. It needs to be found that "the basis for the levy has a natural, although not a necessary, relation to the quantity of the commodity produced" Matthews v. Chicory Marketing Board (Vict.), per Dixon J. [47] . This condition is satisfied if it is found that the levy "has placed upon an essential step in production an impost calculated quantitatively" [48] . Later in his judgment Dixon J. expressed the condition by saying that the levy "must be of such a nature as to affect" [the goods] "as the subjects of manufacture or production or as articles of commerce" [49] . It is thus necessary to look at the "basis" and "the nature" of the levy, or as Kitto J. said in Dennis Hotels Pty. Ltd. v. Victoria [50] , at "the criterion of liability". Thus, for instance, a tax on the ownership of goods where the goods are part of the capital equipment of a business carried on by the owner is not a duty of excise within s. 90. Otherwise Brown's Transport Pty. Ltd. v. Kropp [51] and no doubt Bolton v. Madsen [52] would have been differently decided; for the vehicles in each case were goods and the licence fee was in each case a tax on the goods.
The difficulty of characterization which arises in this case is not only a difficulty in formulating or applying the meaning of "excise" but also the difficulty of characterizing the livestock of a pastoral company. The livestock of a pastoral company is not, generally speaking, a commodity in the course of movement to ultimate consumption. It is the stock of the property, as also is the dead stock - the machinery, plant and equipment. Both kinds of stock will be replaced at the end of their useful working life. The sheep are the livestock which provide the wool; the shearing machinery is the dead stock which enables the wool to be clipped. It is the wool which proceeds on a course from production to ultimate consumption. But the position is more complicated than that. Some of the sheep will be used for breeding and the progeny will be used either to replace the livestock of the property or will be themselves embarked on the course to ultimate consumption by another or others. Other breeding sheep will be acquired. Cattle (other than dairy cattle) and most other animals likewise fall into different categories. The fact that, at the end of that period which the particular economic management regards as the end of their productive life on the property, the animals are sold off does not itself mean that during their productive life they are on the course between their production or acquisition and ultimate consumption any more than it could be so said of the dead stock. Some farmers may choose to turn over their dead stock frequently; others may choose to continue it in use until it can be sold for nothing more than scrap. The same is true of livestock.
Nevertheless the nature of a stocked property is such that there will be on the property at a particular time animals of both classes, animals which are part of the stock strictly speaking and animals which are being "produced", that is to say, grown and fattened in their course to ultimate consumption.
If the levy under s. 7 of the Stock Act, when its operation is examined, can be characterized in its substance not as a tax on the animals but as a tax on their produce - wool, milk or progeny - then the tax will be an excise duty. It is not necessary that the produce be in existence at the time when the liability to the tax accrues. That is what I take to have been decided in Matthews v. Chicory Marketing Board (Vict.) [53] . If in Matthews v. Chicory Marketing Board (Vict.) the tax had been found to be in substance a tax on the land and not, as was found, a tax on the anticipated produce of that land, I venture to suggest that the result would have been different: as I think it is different in the present case. I can see nothing in the Stock Act, to suggest that the tax imposed by s. 7 on the animals is in substance a tax on their produce. The case is different from that of an annual crop. The planting of such a crop is the first step in its production - an essential step as Dixon J. observed in Matthews v. Chicory Marketing Board (Vict.) [54] . The fact that the basis of the assessment was not what the grower garnered but what he planted did not change the nature of the assessment as an assessment on the anticipated produce.
An annual tax on the live stock owned on a particular day, at least so much as is breeding or wool producing stock, is different. It no doubt adds a component to the price at which the produce can be sold if a net profit is to be gained in the conduct of the business. But this alone is not sufficient to make the tax an excise duty. Any tax on capital equipment has that effect. For a tax to be a duty of excise it must be in substance a tax on the commodity produced, and not merely a tax on the equipment, live or dead, used to produce the commodity.
Even though the levy cannot be characterized generally as a tax on the produce of the stock, the fact remains that some of the animals were "commodities" in the sense that they were being grown for sale. It is so alleged in the Statement of Claim. Is that sufficient to vitiate the levy in whole or in part or is it necessary further to examine the basis of the levy in order to see whether it selects as a criterion of liability the growing of those animals for sale or the presence of those animals in their course of being grown for sale? In my opinion it is necessary further to examine the basis of the levy in order to determine the criterion of liability which has been selected.
It does not appear to me that this is a tax on the owner, the basis of which is that he owns livestock which are commodities in their course to ultimate consumption. It is not, generally speaking, possible on any particular day to say, in respect of all the progeny, which are "commodities" and which are part of the stock. It will depend on the "culling" which is a continuing process, both on the number culled for age and the number of progeny required for replacement of those so culled. The tax is one on the owner, the basis of which is that he owns all his livestock. The fact that some of those livestock are or may become commodities is not made the basis of the liability to pay the tax. Where a tax is imposed on or in respect of goods by virtue of the ownership thereof and it does not appear from the legislation when its operation is examined that the tax is imposed by reference to an actual or projected or past course of the goods between their production or manufacture and their ultimate consumption, then the mere fact that the goods may be on that course does not necessarily make the tax a duty of excise. Particularly is this so when the tax is imposed indifferently upon goods which are and goods which are not, or are not in the course of, becoming commodities. Examination of the substantial operation of the present legislation shows that what is imposed is a levy on stock owned, not upon the basis that they are commodities but on the basis of ownership, a levy which is imposed indiscriminately on the stock owned at a particular day whether or not particular items of that stock are, or may be, embarked on a course to ultimate consumption as commodities.
In my opinion, the Stock Act, 1915 Q., as amended, does not impose any duty of excise in contravention of s. 90 of the Constitution.
It is well known that the State of Queensland has a continual problem with stock diseases, keeping out exotic diseases (such as foot and mouth) and controlling endemic diseases (such as cattle tick and pleuro-pneumonia). The Stock Acts are the principal legislative measures against the introduction and spread of stock disease. They "consolidate and amend the law relating to Diseases in Stock". The enactments consolidated begin with the Stock Act, 1915 originally known as the Diseases in Stock Act, 1915. They enable inspectors to exercise vigilance to prevent and deal with disease by supervising stock movements, testing for disease, quarantine, treating infected or suspected animals, as well as other ways. The administration of these defensive procedures through the Acts costs the State millions of dollars each year.
Under the Acts, the owner of stock must pay an annual sum levied at a fixed amount per head of each of various species (above certain limits) owned on a particular day (s. 7). All such sums are paid into the Stock Fund (s. 6 (3)) which, subject to provisions for payment into the "Stock Diseases Compensation and Stock Improvement Fund", is applied to payment of all expenses incurred in the execution of the Acts, as well as to the provision of husbandry services to the cattle, sheep and pig industries (s. 6 (1)). The Stock Fund may be endowed by a grant in aid of moneys out of Consolidated Revenue Fund (at a rate not exceeding one dollar for every one dollar paid into the Fund during the previous twelve months in respect of assessment levied and paid under this Act). The levy is thus the financial basis of this important social legislation.
The context of the Constitution (particularly s. 93) suggests that duties of excise which s. 90 forbids a State to impose are taxes on goods produced or manufactured in the State. In the Stock Acts, the tax is imposed without regard to production or manufacture of goods. There is no limitation on the incidence of the tax which justifies a conclusion that the tax is imposed on production or manufacture of goods such as meat, wool or milk. If taxes are to be treated as duties of excise because they indirectly add to costs of production or manufacture of goods, are taxes on industrial land and payroll taxes to be treated as duties of excise? The tax is imposed (and the rate is the same) whether or not the stock stays in Queensland. The place of production or manufacture (in or out of Queensland) of any goods such as meat, wool, milk or meat on hoof is immaterial.
Duties of excise are the counterpart of duties of customs. Both are taxes which discriminate between goods according to the place of production or manufacture. Duties of customs are taxes upon imported goods. The Constitution recognizes but prohibits State duties of customs, that is, duties upon goods imported into the State (ss. 90, 92, 93, 95) and provides that duties of customs upon goods imported into Australia be uniform. Duties of excise are taxes upon goods produced or manufactured locally, that is, within a State in the case of State duties of excise (also now prohibited; see ss. 90, 93 of the Constitution) or within Australia in the case of duties of excise imposed by the Parliament of the Commonwealth. Section 90 thus prevents discrimination by a State tax between goods manufactured in the State and those of other States. Sections 51 (1), 92 and 99 prevent such discrimination by the Commonwealth. These and (with some qualification) the bounty provisions are directed towards a national economy in the production and manufacture of goods.
In general, taxes imposed without regard to the place of production or manufacture are neither duties of customs nor duties of excise. The essence of each duty is the tendency to discriminate between goods locally produced and other goods. In so far as the tax in the Stock Acts is said to be on goods already manufactured or produced (that is, livestock), it does not discriminate between local and other production. In so far as it is said to be on goods to be produced or manufactured, it also does not discriminate between animals which might be used for production of meat or wool or other products within Queensland, and those which might be used elsewhere in Australia or overseas. Whether or notMatthews v. Chicory Marketing Board (Vict.) [55] was correctly decided, this case is distinguishable if only because in that case the production of chicory (at least at the primary stage) was necessarily production within the State.
Many of the decided cases have widened the constitutional meaning of "excise" greatly (see the observations of McTiernan J. in Parton v. Milk Board (Vict.) [56] and Fullagar J. in Dennis Hotels Pty. Ltd. v. Victoria [57] ; and see Coper, The High Court and s. 90 of the Constitution Federal Law Review, vol. 7 (1976), p. 1). The extension of the constitutional concept in cases such as Dennis Hotels seems to me to be unjustified by the constitutional context or the assumed purpose of s. 90. The meaning of excise may be elastic but it has been stretched too far.
The result is that the Parliaments of the States have been driven to raise revenue by unnecessarily complex measures (see Matthews & Jay, Federal Finance (1972), pp. 317-318).
Section 90 is expressed to make exclusive the power of the Parliament of the Commonwealth to impose duties of customs and excise. It is to be noted that the Commonwealth has not for the sixty years during which this levy has operated (in one form or another) initiated any proceeding to invalidate it, and was not concerned to seek to intervene in these proceedings to complain that the levy invaded the exclusive power of its Parliament.
The Stock Acts, 1915 to 1965 are within the competence of the Parliament of Queensland. The demurrer should be upheld.
Logan Downs Pty Ltd
Queensland