Queensland Rail v Commissioner of Taxation

Diesel Trucks (› 4.5t) Total Fuel - $491,819.01 On Rail On Road Average Percentage 32.34% 67.66% Fuel Allocation $159,054.27 $332,764.74 Total Eligible 367 149 litres 332 765 litres

18 Subsequent correspondence between the Commissioner and Queensland Rail, including a letter dated 4 September 2003 from the Deputy Commissioner to PricewaterhouseCoopers, indicates that by that date, the matters in dispute had changed slightly. They were as follows: '1. Is a claimant eligible for a rebate … for diesel fuel purchased and used in: (a) Plant for planning, development and construction of railways; (b) Graders and slashers to level the ground; (c) Equipment to clean, repair and maintain locomotives and rolling stock; (d) Equipment for loading and unloading items onto/from trains; (e) Generators to provide power for work gangs. 2. Is a claimant eligible for a rebate under (the Acts) for diesel fuel purchased for use in road vehicles fitted with "hi-rail" equipment when travelling on the railway undertaking eligible activities?' 19 The Deputy Commissioner advised that a rebate was available for diesel fuel purchased for use in road vehicles fitted with "hi-rail" equipment when 'travelling on the railway undertaking eligible activities', but not otherwise. 20 The Deputy Commissioner identified the relevant question as whether or not the activities in question (as performed by the identified equipment) were: '… within the generally understood definition of "transport", that is, that they are transport activities within the ordinary meaning of the expression "rail transport". This may be on the basis that those activities are so integral to transport so as to be regarded as being within the ordinary meaning of the word "transport". If they do, then diesel fuel purchased for use in those activities can be regarded as being for use "in transport", and if the transport is by rail, then "in rail transport".' 21 After referring to various other documents, the Deputy Commissioner observed: 'Having regard to the above, it can be said that the definition of "rail transport" is the act or action of carrying or conveying (passengers or goods) from one place to another by a train or tram or other vehicle that travels on either a rail (such as a monorail) or on a pair of rails (trams or trains). It is therefore necessary to determine whether the ancillary activities can be regarded as an act or action of carrying or conveying from one place to another.' 22 After consideration of various authorities, the Deputy Commissioner concluded that: 'To be considered "in rail transport", the activity must satisfy the criteria of: (a) carried out on the actual rail; and (b) by a rail vehicle. Therefore any activities carried out not on the rail, but rather beside it or in a workshop nearby are not considered to be "in rail transport". Any activities carried out on the rail, but not with use of a rail vehicle are also not "in rail transport". Although an activity may seem integral to the actual rail transport operations, it is not necessarily "in rail transport". Therefore, the activities of: (a) planning, developing and constructing railways; (b) levelling the ground; (c) cleaning, repairing and maintaining locomotives and rolling stock; (d) loading and unloading items onto/from trains; (e) generating power for work gangs; are not activities "in rail transport". No rebate is payable under the off road scheme in respect of diesel fuel purchased for use in those activities.' 23 As to hi-rail equipment, the Deputy Commissioner said: 'Vehicles fitted with "hi-rail" equipment would qualify as vehicles used in rail transport under the scheme, when the equipment is engaged in an activity which qualifies for the diesel fuel rebate scheme. However, a claimant will only be eligible for diesel fuel used in such vehicles where they are operated on the railway and used "in rail transport". For example, where the vehicles undertake track maintenance, they are guided by the rails as they travel along the railway repairing and maintaining it and transport repair crews and equipment. Any activity by the vehicle not on the railway (such as travel to and from the railway, beside the railway, positioning of the vehicle etc) or used in activities ancillary to rail transport is not eligible under the diesel fuel rebate scheme. Furthermore, if a vehicle is not designed for actual rail travel but simply drives on or over the rail line/tracks in the course of their activities, then any diesel fuel purchased for use is not eligible for rebate. Since the light commercial vehicles and diesel trucks are fitted with "hi-rail" equipment, they will considered to be engaged "in rail transport" for the purposes of the diesel fuel rebate scheme where they are operating on rails undertaking eligible activities.' 24 The Deputy Commissioner's letter of 4 September 2003 was in response to particular questions posed by Queensland Rail. For that reason it may not have fully reflected the Deputy Commissioner's position. As I understand it, it is accepted the rebate will apply to use of diesel fuel in all "on-rail" vehicles for "eligible activities", not only in hi-rail vehicles (which are capable of on-rail and off-rail use). 25 After further correspondence, Queensland Rail made a formal claim for rebate for all of its diesel use. On 30 April 2004, the claim was disallowed. Queensland Rail objected to the decision. The objection was disallowed. Queensland Rail appeals from that decision. 26 Queensland Rail does not assert, in this case, that the rebate is payable in connection with the building of a new railway line. However it does not admit that the rebate is not payable in those circumstances. Although there are some contrary suggestions in the material, it also seems that no claim is made in connection with the construction of new rolling stock. The claim is in connection with loading and unloading goods and maintenance activities. 27 It is for the appellant to demonstrate that the assessment to duty is excessive. In this case, Queensland Rail must demonstrate that the Deputy Commissioner's construction of the relevant legislation is erroneous. The Commissioner submits that in the present context, 'in rail transport' means 'in the act of transporting passengers or goods by rail.' 28 Some preliminary points should be made concerning the effect of s 164. Firstly, in order to qualify for the rebate, a person must purchase diesel fuel for a specified use. Paragraph (a) specifies mining operations. That expression is extensively defined in subs 164(7). Paragraph (aa) specifies primary production which is also defined in some detail. I have previously referred to the definition of rail transport. Paragraph (ab), concerning rail transport, is in similar form to par (ac), concerning marine transport. Paragraphs (ad), (b), (c) and (d) all deal with use at particular types of premises. 29 For the purposes of par (ab), the relevant fuel must be purchased for use: · in rail transport; · otherwise than for the purpose of propelling a road vehicle on a public road; and · in the course of carrying on an enterprise. 30 Because of the long history of state government rail operations in Australia, one tends to infer that any reference to rail transport must be to transport on one or other of those systems. However the rebate is more widely available. It extends to use in rail transport 'in the course of carrying on an enterprise'. Thus it would be available to a mining company which constructed its own railway line for the purpose of transporting its product, or to a sugar mill which operated a network of cane trains. In such cases, the relevant enterprise will involve more than the operation of a railway. In the case of Queensland Rail, the relevant enterprise will be simply that. If the wording of par (ab) were adapted to describe its application to Queensland Rail, it would read 'in rail transport … in the course of carrying on the enterprise of a railway (or supplying rail transport).' 31 I mention this matter because it may lead to one of two errors in approaching the proper construction of par (ab). One might be tempted to conflate the two questions so that the question became whether or not the fuel was purchased for use in connection with Queensland Rail's business or enterprise. Such an approach might be too favourable to Queensland Rail. Alternatively, the dual focus upon rail transport might lead to an assumption that the expression "rail transport" must describe something less than Queensland Rail's entire enterprise; in other words, that the relevant rail transport must be something less than carrying on the enterprise of a railway or supplying rail transport. Such an approach may be unduly favourable to the Commissioner. 32 The proper approach is to ask whether or not Queensland Rail has purchased diesel fuel for use in rail transport and if so, whether or not such use is in the course of carrying on an enterprise. In the present case, however, the focus is on the first question. 33 Counsel have referred me to a number of cases concerning other paragraphs of subs 164(1). However they appear to be of little assistance for present purposes. Paragraphs (ab) and (ac) are different in structure from the other paragraphs. I observe, however, that the expressions "mining operation" and "primary production" suggest that the rebate is to be available in connection with any kind of use in those industries, subject only to the exceptions concerning road use. 34 There is one case concerning par (ac). It is Port of Brisbane Corporation v Federal Commissioner of Taxation [2004] FCA 1232. That was an appeal from a decision of the Administrative Appeals Tribunal and was therefore limited to questions of law. The decision appears to have been based upon a finding that the Administrative Appeals Tribunal had considered irrelevant material in construing the relevant legislative provisions. In those circumstances, the decision can be of little assistance for present purposes. 35 This case depends upon the meaning of the expression "in rail transport". A considerable amount of time was spent in discussing the meaning of the word "in", in my opinion, not a particularly fruitful area of debate. To my mind, the more significant aspect is the word "transport", with any particular connotations that the word "rail" may contribute. The Shorter Oxford Dictionary defines the word "transport", used as a noun, to mean: 'transfer or conveyance of property … the carrying or conveyance of a person or thing from one place to another … a system or means of transportation or conveyance of people, goods etc …' 36 The question depends substantially upon whether, in the present context, the word "transport" means the carriage or conveyance of persons or things or the system of transportation or conveyance. The Commissioner advanced the former view. Queensland Rail advanced the latter. The Commissioner submitted that the word "in" connoted such a close association between the use of the diesel fuel and the rail that it could only be satisfied if the usage occurred on the rail. Thus the movement of persons or goods (including Queensland Rail's own equipment) on rail would be included, but loading or unloading a train with loading equipment, which was not on-rail, would not. Similarly, the use of diesel fuel in rail-mounted track maintenance equipment would be included, but such use in non-rail mounted equipment would not. 37 This approach may give too much significance to the word "rail" which is used adjectivally to qualify the word "transport". The preposition "in" governs the noun "transport". In other words the phrase "in rail transport" means "in transport which uses rail". 38 If Parliament had intended that only use of diesel fuel in activities on-rail was to attract the rebate, it would have been easy to say so. Language analogous to the very specific language used for the purpose of excluding the rebate in the case of vehicles used on public roads and use relating to forestry might have been appropriate. Paragraphs (ad), (b), (c) and (d) are "place-specific" and might also have been appropriate models for a requirement that the relevant activity occur "on-rail". 39 If the purpose of the legislation is to subsidize transport costs, particularly for regional, rural and remote areas, and to benefit the environment, then there is no apparent reason for such a narrow construction. The cost of providing rail transport (inevitably passed on to customers) will include the cost of fuel used in maintaining infrastructure and equipment and in loading and unloading, as well as the cost of fuel used in trains. The environment will presumably benefit as a result of diesel fuel use, whether it is used on or off track. 40 Queensland Rail, in advancing its broader view of the meaning of par (ab), seeks support from the words in parenthesis, namely 'otherwise than for the purpose of propelling a road vehicle on a public road'. It submits that if the words "in rail transport" had the narrow meaning urged by the Commissioner, then it would not have been necessary expressly to exclude use of fuel for the purpose of propelling a road vehicle on a public road. The Commissioner points out that there are similar exceptions in other paragraphs. He submits that it is possible that the words were included in par (ab) (and, presumably, par (ac)) out of an abundance of caution or by oversight. However the careful distinction between a "vehicle" in par (a) and "a road vehicle" in pars (aa), (ab) and (ac) suggests that considerable care was exercised in deciding how the exceptions should be drafted. A road vehicle is 'a vehicle of a kind ordinarily used on roads for the transport of persons or goods.' See s 164(7). The use of fuel in any vehicle on a public road is excluded for the purposes of par (a), but only use in a road vehicle on a public road is excluded in the each of the other three paragraphs. The distinction contemplates either mining operations involving the use of vehicles (other than road vehicles) on roads, which use is not to attract the rebate, or primary production, rail transport and marine transport involving the use of vehicles (other than road vehicles) on roads, which use is to attract the rebate. It is not possible to take the matter any further. I do not accept the Commissioner's assertion that the exclusion in par (ab) was inserted by inadvertence or out of an abundance of caution. 41 As I have said the breadth of the availability of the rebate identified in pars (a) and (aa) is difficult to reconcile with the Commissioner's argument. Subject to the one exception in each case, the intention is that the rebate be available in connection with all use of diesel fuel in mining operations and primary production. It is difficult to see why it would be thought appropriate to limit the availability in connection with the activities identified in pars (ab) and (ac). 42 A person is entitled to the rebate if he or she 'purchases diesel fuel for use by the person' in one of the prescribed uses. A person who purchases diesel fuel for use in rail transport is likely to be purchasing in relatively large amounts, even if the rail system in question is very small. It is unlikely that such a purchaser would identify purchases as being for either on-rail or off-rail use. Appropriation to that use would probably occur at a later stage. It would be difficult for a user to satisfy the test as at the time of purchase if only some of the fuel used in a relevant enterprise attracted the rebate. 43 The requirement that the use be 'in the course of carrying on an enterprise' also adds colour to the meaning of the words "in rail transport". It suggests that the rail transport in question is ongoing rather than occasional and of a commercial nature. It seems unlikely, in that context, that Parliament intended to draw an artificial distinction between activities on-rail and off-rail, all of which were necessary to the transport of people or goods by rail. 44 In my view, the words "in rail transport" mean 'in a system or means of transportation or conveyance of people or goods by rail'. Such a system must inevitably involve loading and unloading activities and maintenance activities. The use of diesel fuel in the course of such activities is necessarily "in" that system, regardless of whether such use occurs on- or off-rail. 45 I allow the appeal and set aside the Commissioner's decision. I will adjourn the matter to enable the parties to formulate appropriate orders. I will hear submissions as to costs. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Associate: Dated: 30 June 2006 Counsel for the Applicant: Mr J W de Wijn QC Mr S H P Stewart

Solicitor for the Applicant: PricewaterhouseCoopers Legal

Counsel for the Respondent: Mr J A Logan SC Mr C D Coulsen

Solicitor for the Respondent: Australian Government Solicitor