The principal contentions of QTH and IEL as to the obligation of the Commissioner to give reasons and the rejoinders of the Commissioner
37 The contentions of QTH and IEL made the following preliminary observations:
(i) the focus of the applications of QTH and IEL was that each of the decisions of the Commissioner as a Commonwealth officer was made under an enactment, whether being either the Tax Act or arguably the Administration Act it did not ultimately matter which, being decisions conferring rights in principle to reasons pursuant to s 13 of the ADJR Act;
(ii) the rights to relief sought by QTH and IEL from the Commissioner under the auspices of the ADJR Act turned on whether each had a right to seek a refund or reduction of additional tax imposed by way of penalty;
(iii) the contest presently arising was whether QTH and IEL were entitled to bring applications for review of the relevant decisions of the Commissioner under the auspices of and pursuant to s 5 of the ADJR Act, which enumerates various grounds for administrative review, and to do so notwithstanding the relevant classes of decisions excluded by Schedule 1 thereto, and in particular, as appear in par (ga) thereof;
(iv) the Commissioner had expressed the opinion, purportedly pursuant to s 13(3) of the ADJR Act, that QTH and IEL were not entitled to make the subject applications for relief, and have given notice to that effect; hence the jurisdiction of the Federal Court under s 13(4A) of the ADJR Act has been invoked by QTH and IEL to make the orders sought; and
(v) the Parliament expressly preserved the right to seek relief under the ADJR Act when enacting Part IVC (including s 14ZY) of the Administration Act and inserting par (ga) in Schedule 1 to the ADJR Act by the Taxation Laws Amendment Act (No 3) 1991 (Cth).
38 Subsection 13(4A) of the ADJR Act was thus said to crystallise the operation of the Court's jurisdiction in the terms which I again reproduce for ease of reference:
'The Federal Court… may, on the application of:
(a) a person to whom a request is made under subsection (1); or
(b) a person who has received a notice under subsection (3);
make an order declaring that the person who made the request concerned was, or was not, entitled to make the request.'
It was submitted by QTH and IEL that although the word may is strategically used in subsection (4A), the Court is not thereby afforded a discretion whether or not to make the declaration sought, assuming that the grounds for so doing are made out. That submission was said to be supported by the longstanding decision of the High Court in Finance Facilities Pty Ltd v Commissioner of Taxation (1971) 127 CLR 106. The validity of the submission was not seemingly repudiated by the Commissioner, and is in any event plainly correct, having regard to the context generally of s 13 of the ADJR Act. I did not understand the Commissioner to dispute the proposition. Subsequent exemplifications of the application of that principle of statutory construction that the word 'may', where appearing in contexts such as that involved in Flight Facilities, is not used to confer a discretion, but rather to confer a power upon proof of the particular circumstances giving rise to the exercise of the power, appear in TCN Channel 9 Pty Ltd v Antoniadis (No 2) (1999) 48 NSWLR 381, which involved the interpretation of Part 15AA rule 18 of the Supreme Court Rules 1970 (NSW) whereby the 'Court of Appeal may make such orders for restitution… as the Court of Appeal thinks fit',and further appear in Director of Public Prosecutions v West (2000) 48 NSWLR 647, which involved the interpretation of provisions of the Justices Act 1902 (NSW) containing a condition that a magistrate 'may extend accordingly the time for hearing the matter'.
39 The scope of the reasons which QTH and IEL submitted as necessary to be provided by a decision-maker, in circumstances where the decision-maker was obliged in law to provide reasons for his decision, as here in the case of s 13 of the ADJR Act, was framed by QTH and IEL, in the light of subsection (1) thereof, to identify the material factual findings, to identify the evidence on which those findings are based and to set out the reasons.
40 The critical contention advanced by QTH and IEL was that par (ga) of Schedule 1 to the ADJR Acthas no application to or operation upon the particular nature of the additional tax imposed by the various provisions of Part VII of the Tax Act, which as already indicated is headed 'Penalty Tax', because although constituting a tax so described, that additional tax the subject of Part VII is in substance, as well as in practical operation, not a tax, charge or duty, but a penalty according to legal principles. Were additional tax of the descriptions the subject of those sections, in substance and otherwise on true analysis, taxes and not penalties in substance as well as by purported description, QTH and IEL further submitted, those sections, and other aspects of the Tax Act, would be invalid by reason of s 55 of the Australian Constitution. In that regard, I was referred to the unanimous judgment of seven members of the High Court in Air Caledonie International v Commonwealth (1988) 165 CLR 462, where a fee payable for immigration clearance, imposed by a section of the Migration Act 1958 (Cth), was held to be invalid as constituting a tax in legislation containing provisions otherwise addressing migration subjects.
41 More directly bearing upon the present issues arising, I was further referred by QTH and IEL to Re Dymond (1959) 101 CLR 11 at 21-22 (per Fullagar J with whose reasons for judgment Dixon CJ, Kittto, Taylor and Windeyer JJ agreed), where reference was made to 'the penal nature of the liability' imposed 'by way of additional tax' in the following context:
'It is true that the amount payable under s 10(2B) or s 46, whether it be the sum of Ł1 or a larger sum, is expressed to be payable "by way of additional tax". And in Richardson v Federal Commissioner of Taxation (1932) 48 CLR 192, this Court, dealing with the similar provision in s 67 of the Income Tax Assessment Act 1922-1930, held that (to use the words of Dixon J) "… the procedure of assessment, objection, review and appeal does apply to additional tax under s 67" (at 204-5). But all this is matter of machinery, the appropriateness of which is indicated by the words "by way of additional tax". It does not affect the penal nature of the liability imposed. As Evatt J said in Richardson's Case "But s 67 is a penal provision, as is indicated by the heading to Pt VII, and the amount of liability therein specified is an amount in the nature of a penalty. The liability is not to pay 'additional tax' but to pay an amount 'by way of additional tax'"(at 214). The words "by way of additional tax" mean, I think, no more than that the amount of the penalty (to the extent to which it is not remitted) is to be notified, like the tax itself, by a notice of assessment, so that the quantified penalty and the quantified tax are subject to the right of objection and appeal, made actually payable by the same machinery. The liability is imposed by the Act not as a consequence of a sale of goods but as a consequence of an attempt to evade payment of a tax on a sale of goods. The exaction is directly punitive, and only indirectly fiscal. It is imposed for the protection of the revenue, but as a sanction and not for the sake of revenue as such. It is not a tax on the sale of goods, and it is not a tax on anything else.'
42 Focusing further upon the critical nature of the par (ga) expression charge (which of course I have earlier extracted), it was next pointed out on behalf of QTH and IEL that even if conceivably read in isolation, such as to encompass the notion of penalty, the true nature or character relevantly thereof is not to be construed as though divorced from the context in which it is used in Schedule 1 to the ADJR Act, reference generally being thereby made to the well known passage appearing in the joint reasons for judgment of Brennan CJ, Dawson, Toohey and Gummow JJ in CIC Insurance Ltd v Bankstown Football Club Limited (1997) 187 CLR 384 at 408, where the modern approach to statutory construction was described as requiring that '… the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise', and as using context '…in its widest sense to include such things as the existing state of the law, and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy'.
43 The context to par (ga) was pointed out by QTH and IEL to include the further class of decisions excluded from the operation of the ADJR Act by Schedule 1 thereto, namely par (e) thereof, which uses the same critical par (f) expression tax, charge or duty twice in the wider context of fiscal statutes extracted in full below:
'(e) decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax, charge or duty, or decisions disallowing objections to assessments or calculations of tax, charge or duty, or decisions amending, or refusing to amend, assessments or calculations of tax, charge or duty, under any of the following Acts:
A New Tax System (Goods and Services Tax) Act 1999
A New Tax System (Luxury Car Tax) Act 1999
A New Tax System (Wine Equalisation Tax) Act 1999
Australian Capital Territory Taxation (Administration) Act 1969
Debits Tax Administration Act 1982
Coal Excise Act 1949
Customs Act 1901
Customs Tariff Act 1995
Excise Act 1901
Fringe Benefits Tax Assessment Act 1986
Income Tax Assessment Act 1936
Income Tax Assessment Act 1997
Pay-roll Tax Assessment Act 1941
Pay-roll Tax (Territories) Assessment Act 1971
Petroleum Resource Rent Tax Assessment Act 1987
Acts providing for the assessment of sale tax
Superannuation Guarantee (Administration) Act 1992
Taxation Administration Act 1953, but only so far as the decisions are made under Part VI of that Act
Training Guarantee (Administration) Act 1990
Trust Recoupment Tax Assessment Act 1985
Wool Tax (Administration) Act 1964.'
The inclusion of reference to the Tax Act generally and to the Administration Act, to the extent of decisions made under Part VI of the latter legislation, is to be observed.
44 It was emphasised on behalf of QTH and IEL that both pars (e) and (ga) of Schedule 1 to the ADJR Act are concerned with the process of assessment and calculation of fiscal imposts and with the subsequent assessment of objections against assessments and calculations thereof. As I have earlier pointed out, s 14ZY of the Administration Act requires the Commissioner in effect to determine taxation objections, and forms part of Part IVC of the Administration Act headed 'Taxation Objections, Reviews and Appeals'. (Part IV of the Administration Act the subject of par (g) of Schedule 1 to the ADJR Act relates to exchange control). The word charge was added (at least) to par (ga) by Act 60 of 1990 called, the Training Guarantee (Administration) Act 1990 (Cth), being legislation which imposed the training guarantee charge, which was held by the High Court to be valid in Northern Suburbs Cemetery Reserve Trust (1993)176 CLR 555, upon the basis that it was in the nature of a tax, and significantly for present purposes, not in the nature of a penalty, since the statutory liability to pay that training guarantee charge did not arise from any failure of an employer to discharge antecedent obligations to expend moneys in relation to eligible training programs.
45 QTH and IEL submitted that 'it is clear beyond doubt, from the legislative history of and the context of Schedule 1' to the ADJR Act, that the expression charge as 'crucially'contained in par (ga) of that Schedule, contrary to the Commissioner's case, does not connote simply a fiscal liability to pay money imposed upon a taxpayer. Rather, so QTH and IEL submitted, the term charge, as in the case of tax and duty appearing also of course within the par (ga) exclusion (and also within the par (e) exclusion), is referrable to 'the value or amount of transactions or dealings by taxpayers, and so assessed by the Commissioner in performance of his role of general administration of Acts imposing taxation'. QTH and IEL submitted further that the term charge is only included in pars (e) and (ga) of Schedule 1 to the ADJR Act in order to avoid any issue otherwise arising that a fiscal impost, the power to impose whereof rests on s 51(ii) of the Commonwealth of Australia Constitution Act 1900 (as amended) is not a tax because it is called a charge (s 51(ii) relates, in terms, to Taxation, but so as not to discriminate between States or parts of States). In reply, the Commissioner contended that the applicants' case amounted merely to an 'attempt to confine the ordinary meaning of the word charge in par (ga) of Schedule 1 [of the ADJR Act] to a more narrow meaning than that which it would ordinarily bear', being an attempt said to be not supported by the Supplementary Explanatory Memorandum related to the amending legislation which inserted par (ga) into Schedule 1 of the ADJR Act. I will shortly reproduce the text of that Memorandum.
46 I observe that the ordinary meaning of the word 'charge' will vary widely according to the context in which it is used, as is apparent from The Macquarie Dictionary (Revised Third Edition). One of the numerous meanings there appearing does indeed include to hold liable for payment, thus coinciding to that extent with the meaning ascribed by the NSW Court of Appeal in Davison. That meaning was also adopted in the circumstances of contractual dispute involved in BP Australia Pty Ltd v Nyran Pty Ltd (2003) 198 ALR 442 (see [77] and [88]-[90] appearing in the judgment of R D Nicholson J). In the present case however the statutory contexts are of course the Administration Act and the Tax Act, in particular to the extent that the same are specifically excluded by Schedule 1 to the ADJR Act from operation in relation thereto. Whilst the notion of holding a person liable for a payment of tax imposts may be said to be within the scope of the Schedule 1 exclusions of pars (e) and (ga) in particular, those tax imposts at the centre of the present dispute appear to be in substance in the nature of penalties, as the heading 'Penalty Tax' to Part VII of the Tax Act, and the various sub-headings thereunder, explicitly connote. No issue arises in the present proceedings as to the liability of QTH and IEL to income tax per se in accordance with the Tax Act, and s 51(1) thereof in particular, in the light of the outcome of the Spassked proceedings. The matter here remaining, at the instance of QTH and IEL, is their endeavours to secure the review of the imposition of additional tax in the nature of penalty tax, the latterbeing the fiscal description used in the headings to sections within Part VII of the Tax Act (apart from the heading 'Penalty Tax' to Part VII itself) that I have already identified, commencing with the former s 223 and following thereafter, as specifically identified by QTH and IEL in particular, ss 226, 226C, 226G, 226H, 226K, 226L and 226X.
47 The applicants further submitted that the statutory intention, for which they contended as forensically open to be inferred, to the effect that decisions to remit penalties imposed under Part VII of the Tax Act are not excluded from review under the ADJR Act, was effectively established by the decision of the Full Court in Mostyn, where the following appears (at 268), in the context of reference by the Full Court to the provisions of par (e) of Schedule 1 to the ADJR Act:
'Paragraphs (e) thereof specifies a decision making, or forming part of the process of making, or leading up to the making of an assessment of tax, inter alia, under the Act. Since the Deputy Commissioner's power to remit additional tax arises independently of his power to assess income tax, the provisions of par (e) can have no application to this case.'
No reasoning was provided, but in the light of Part VII of the Tax Act, containing of course the sections above enumerated, what may be observed above by the Full Court, albeit probably obiter, has persuasive force.
48 My attention was then drawn by QTH and IEL to the Supplementary Explanatory Memorandum to the Bill for the Taxation Laws Amendment Act (No 3) 1991 (Cth), to which I have already referred in another context, includingas it did reference to par (ga) as then proposed, which further contained the following:
'Two amendments to Part 7 of the Bill are to be moved on behalf of the Government. These amendments relate to the imposition of a time limit in relation to the determination of taxation objections and to an amendment to Schedule 1 of the [ADJR] Act…
The effect of the proposed amendment of paragraph (ga) of Schedule 1 of the ADJR Act is to ensure the continuation of the right to dual avenues of review (ie appeal to the Federal Court or application for review to the AAT, or review under the ADJR Act) in respect of those objection decisions that do not relate to assessments or calculations of tax, charge or duty…
Consequential amendments
Schedule 4 of the Bill contains amendments to certain Acts as a consequence of the proposed consolidation of taxation objection, review and appeal provisions in the Taxation Administration Act. One of those is an amendment to Schedule 1 of the ADJR Act made by paragraph (ga). This provision sought to ensure that objection decisions now made under various taxation laws would, when made under the Principal Act, get the same treatment under the ADJR Act as they do now. It has been pointed out that it is possible, in respect of a limited range of objection decisions, that a person may currently have a right to dual avenues of review - that is, under the relevant taxation laws and under the ADJR Act. The proposed amendment to paragraph (ga) will ensure the continuation of any right to dual avenues of review that may now exist [the emphasis of QTH and IEL] in respect of objection decisions that do not relate to assessments or calculations of any tax charge or duty (Schedule 4, paragraph (ga) of Schedule 1 of ADJR Act).'
(The emphasis placed upon the words in the second and third paragraphs above was that of QTH and IEL). In short, the Supplementary Explanatory Memorandum underlined the maintenance of the status quo as to avenues of review in favour of taxpayers in circumstances of income tax disputes with the Commissioner.
49 The observations expressed in the Supplementary Explanatory Memorandum were submitted by QTH and IEL to correspond with what was expressed by the Commissioner, in the capacity as the Commonwealth officer charged with the administration of Part VII of the Tax Act, and inclusive therefore of s 227 (which relates of course to the assessment of additional tax), as applicable to the years of income now the focus of dispute. So much was described by QTH and IEL as reflecting, 'no doubt intentionally', the views promulgated by the Commissioner in IT2521.
50 The Commissioner responded that the reference in the Supplementary Explanatory Memorandum to 'dual right' of appeal, 'in respect of those objection decisions that do not relate to assessments or calculations of tax, charge or duty', did not support the proposition that judicial review may be sought of a decision to remit additional tax, and contended instead that it was 'precisely because a decision to remit additional tax relates to an assessment or calculation of tax or chargethat there is only one relevant avenue of appeal - [being] that provided for by Part IVC of the [Administration Act] which contains the tax appeals provisions'. The Commissioner pointed out that there are dual avenues of appeal for decisions which do not relate to assessments or calculations of tax, charge or duty,being decisions which can be objected against under the machinery of the Tax Act; examples given by the Commissioner included the following:
(i) a taxpayer may object against a decision by the Commissioner, in the context of Division 10BA relating to Australian films, that a person is not an appropriate person for the purposes of s 124AZADA(2) and (4) (see s 124AZADA (10)); and
(ii) a taxpayer may object against a decision of the Commissioner to refuse to issue a certificate under Division 11AS of Part III of the Act, which provides exemptions in certain cases for interest withholding tax (see s 128P).
It was pointed out by the Commissioner that decisions in respect of those objections were subjected to dual avenues of appeal because they would not relate to an assessment or calculation of tax, charge or duty, whereas a decision to remit additional tax is in a different category, in that it does relate to an assessment or calculation or calculation of tax or a charge.
51 QTH and IEL acknowledged that IT2521, which I have earlier extracted in full, is not a binding public ruling within the auspices of Part IVAAA of the Administration Act, though it was pointed out by QTH and IEL that the Commissioner has repeatedly stated that he would 'stand by what is said in [such] rulings and depart from them only if there are good and substantial reasons'. In this regard, I was referred by QTH and IEL to what appears in Taxation Ruling 92/1 at [38], and also to Practice Statement 2001/4; the latter was reproduced in the submissions of QTH and IEL to the following extent:
'96. These rulings provide guidance and instruction for both the public and ATO staff. They do not have the force of law. When the time comes to assess liability to tax, the law as it then exists must be applied to the facts as established at that time: see FCT v Wade (1951) 84 CLR 105. However, the basic administrative policy of the ATO is to stand by what is said in these rulings and to depart from them only if there are good and substantial reasons. Any departure would be confined to situations where:
(i) there have been legislative changes since the ruling issued;
(ii) a Tribunal or Court decision has affected our interpretation of the law since the ruling issued; or
(iii) for other reasons, the ruling is no longer considered appropriate - for example, if commercial practice has changed, the ruling has been exploited in an abusive and unintended way, or the ruling is found on reconsideration to be wrong in law.'
Accordingly it was asserted by QTH and IEL that '[t]here is a reasonable expectation on the part of the taxpayer community that the Commissioner will stand by the views he [has] expressed, particularly in public rulings which have not been withdrawn and where the exceptions noted in Practice Statement 2001/4 are not applicable'. It was further contended that 'if the Commissioner seeks to rely on a view of the law contrary to that publicly expressed, and offered to the community as available to rely on, the Court should not summarily dismiss a claim brought consistently with that expectation'. Moreover QTH and IEL further asserted that it could not be said in any event, in circumstances of that kind, that there was no reasonable cause of action, or that the claim was frivolous or vexatious, or that it was an abuse of process, within Order 20 rule 2 of the Federal Court Rules, as is contended by the Commissioner in the two notices of objection to competency filed in these proceedings.
52 The Commissioner rejoined in relation to the submissions of QTH and IEL as to the significance of IT2521, asserting that the same were misplaced, for the reason that the ruling dealt with 'a different set of circumstances, and was issued prior to the introduction of the critical par (ga) to Schedule 1 of the ADJR Act'. As I have earlier indicated, IT2521 was issued three years prior to the 1991 legislative amendments the subject of Part IVC of the Administration Act. It was further said by the Commissioner that IT2521 provided that the discretion to remit taxation could be exercised independently of the assessment process, and that in such a case, an aggrieved taxpayer can seek review of such a decision under the ADJR Act, being an entitlement described as 'not surprising', since '[a]bsent the issue of a relevant assessment, a taxpayer would have no other avenue to appeal.' The Commissioner further pointed out '… that is not this case, because here the decision to remit took place as part of the assessment process, not independently of it, and that each applicant has a right to appeal the [Commissioner's] exercise of the discretion to remit as part of the presentation of their tax appeals otherwise to this Court under Part IVC of the [Administration Act]'. That right was said by the Commissioner 'to have already been exercised by QTH in respect of the 1991 fiscal year, and by IEL in respect of the 1996 fiscal year'.
53 More critically to the point however, it was submitted by QTH and IEL, in relation generally to the Commissioner's position postulated upon the basis of the existence of an avenue of appeal contained in Part IVC of the Administration Act, that the same was 'both misdirected and premature'. That was said by QTH and IEL to be because the relief sought in the present proceedings is not that of review of the remission decision, but merely the provision of reasons for the making of the decision. Thus it was pointed out by QTH and IEL in that context that since review of the decision not to remit is available under Part IVC, if relief is to be sought by QTH and IEL in Part IVC proceedings, such proceedings would not overlap with the present application of QTH and IEL for the provision by the Commissioner of reasons. It was emphasised by QTH and IEL that since there was no power or authority, in the context of proceedings under Division 5 of Part IVC of the Administration Act, to require the Commissioner to provide a statement of his reasons for a challenged decision, and moreover, since no statement of reasons had yet been furnished by the Commissioner (such as is presently sought in the subject proceedings), there could not apparently exist any document containing section 13 reasons which would be discoverable in Part IVC proceedings. The reluctance therefore of the Commissioner to expose the reasons for the very decision here the subject of dispute, and the Commissioner's election instead to litigate the present motion, rather than simply to provide the reasons requested, was submitted by QTH and IEL per se to 'manifest the very need which the provisions of section 13 was enacted to meet'.
54 QTH and IEL next referred to the contention of the Commissioner that because of:
(i) the Commissioner's obligation to file a statement of facts, issues and contentions if so directed by the Court (referring thereby to Rio Tinto Limited v Federal Commissioner of Taxation [2004] FCA 335 (Sundberg J));
(ii) the ability of a taxpayer to seek and obtain particulars of the exercise of the Commissioner's power to remit additional tax by direction of the Court; and
(iii) the particulars, and further and better particulars, already supplied to both QTH and IEL in the Part IVC tax appeals being conducted in this Court;
there existed power or authority vested in QTH and IEL under Division 5 of Part IVC of the Administration Act to require the Commissioner to provide a statement of his reasons for the decision challenged; however none of those three matters, it was said, could seemingly be said to operate or bear upon the issues of legislative construction, which I think to be strictly correct.
55 In conclusion, the applicants QTH and IEL contended that no basis for any discretionary refusal of the relief sought had been propounded by the Commissioner. Nevertheless the Commissioner did ultimately contend that if the Court did not accept the correctness of the Commissioner's notices of objection to competency, final relief should be refused to QTH and IEL as a matter of discretion, because:
(i) the orders sought would have no practical effect; that was said to be because particulars, and subsequent further and better particulars, have been furnished by the Commissioner to QTH and IEL 'about how the [Commissioner] exercised his discretion to remit additional tax for both the 1991 and 1996 years of income'; moreover reasons were said to have been already provided to QTH and IEL in the Part IVC tax appeals in respect of the same years about precisely the same issue;
(ii) the letter of the Commissioner's solicitors of 10 November 2004 to the solicitors for QTH and IEL invited the applicants 'to identify urgently what information each of them wished to obtain in the ADJR proceedings which each applicant could not obtain in the Part IVC tax appeals', yet no response had been made thereto.