Ad valorem duties of customs are calculated upon the sum of the following items, viz., (a) either the actual price paid for the goods by the importer with any special deduction added, or the current domestic value of the goods in the country of export if that be higher; (b) the charges payable at the port of export to place the goods free on board; and (c) an additional ten per cent (sec. 154 (1) of the Customs Act 1901-1930). In thus ascertaining the value for duty, it is the established practice to exclude a buying or indent commission if it is a charge made to the importer by a buying agent for services rendered, and not an allowance made by a manufacturer to the buying agent.

In the case of goods imported from the East, the Customs Department appears to fear that the buying commission may be used as a means of reducing the true price paid for the goods. The merchant, who really occupies the position of seller to the importer, may assume the guise of a buying agent charging a buying commission. What, in substance, is his profit upon the purchase by him of the goods from the manufacturer and their resale to the importer, the supposed buying agent may charge as a commission payable to him by the importer on the price that he paid to the manufacturer.

In calculating the value for duty of goods imported from the East, it is the practice of the Customs Department before excluding a charge for buying commission shown on the invoice to require the production of satisfactory evidence that it is a buying commission, including statutory declarations by the agent and the importer. According to an announcement of this practice made by the Customs Department, if the evidence submitted is not acceptable, cash securities under secs. 216 and 42 of the Customs Act will be required as a condition of delivery of the goods pending production of conclusive evidence as to the genuineness of the charge for buying commission.

Sec. 216 provides that the Collector may require from the owner of any goods proof by declaration or the production of documents that the goods are owned as claimed, and are properly described, valued, or rated for duty, and the Collector may refuse to deliver the goods or to pass any entry relating thereto pending such proof.

Sec. 42 provides that the customs shall have the right to require and take securities for compliance with this Act and generally for the protection of the revenue of the customs, and, pending the giving of the required security in relation to any goods subject to the control of the customs, may refuse to deliver the goods or to pass any entry relating thereto.

The security, which is required before the goods are released, is the deposit of a sum equivalent to the increase in duty which would be payable if the disputed buying commission is included in the value for duty.

The conditions upon which this security is given are expressed in a departmental form entitled "Memorandum of Cash Deposit under sec. 42 pending production of evidence under sec. 216."

The departmental form states that, pursuant to the requirement of the Collector, the sum is thereby deposited with the Collector as security for the protection of the revenue of the customs in respect of the goods in question, and that the condition of such security is that, if proof shall within six months or such further period as the Collector allows be produced to and to the satisfaction of the Collector that the goods are in the entry properly described and valued for duty, then the amount of the deposit shall be returned, otherwise it shall be the property of the Commonwealth.

It will be observed that by this form of security an attempt is made to bring two independent powers into conjunction. Under one section the goods may be retained until proof of value is furnished; under the other, until a security for the protection of the revenue is given. Under the conditions of the security the Collector takes the money instead of the goods and retains it if the proof of value is not forthcoming. The terms of the security do not suggest that the deposit, if in default of the required proof it becomes the property of the Commonwealth, constitutes a payment of the duty which would have been underpaid if in fact the buying commission ought to have been included in the price. It is framed as if it was the forfeiture of a penal sum like that of a bond. If the security took the form of a bond and it was lawfully obtained, the Crown might recover the penalty, although no loss of revenue was suffered. If it be lawful for the customs to exact the deposit upon such terms, there appears to be nothing to prevent the Crown from forfeiting the deposit and proceeding to recover the duty.

For some time Woolworths Ltd., who are the prosecutors, have been importing goods from Japan. The invoices show a buying commission. A long controversy has taken place with the Customs upon the question whether it ought or ought not to be included in ascertaining the value for duty. Woolworths Ltd. have consistently maintained that it represents an ordinary and genuine buying commission which forms no part of the price paid for the goods. In support of this contention they have laid much evidence before the Department of Customs. That Department has exhibited great fluctuation of opinion upon the matter. In the course of the controversy, Woolworths Ltd., in order to obtain their goods, have paid under protest the extra duty involved pursuant to sec. 167 of the Customs Act and then have sued to recover the amount. When that was done the Customs Department has refunded the amount sued for. But next, having presumably repented of the refund, the Department has claimed repayment of the amount refunded. It is not to the purpose to recount the inconsistent decisions given by the Customs Department which appear to have arisen from a reluctance to take a decided course of action. It is reasonably plain, however, that while the Department was not satisfied that the buying commission was a genuine remuneration for services and did not represent part of the price paid by the importer for the goods, it was at the same time unwilling to submit the question for decision in a Court of law. On the other hand, great anxiety has been displayed throughout by Woolworths Ltd. to obtain an opportunity of establishing their case by evidence in open Court. Precisely why the Customs Department feared the consequences of a judicial investigation of the bona fides of the agency arrangement does not appear. But it is clear that the Department of Customs set out to avoid such a method of determining the controversy.

If Woolworths Ltd. were able to avail themselves of the machinery provided by sec. 167 of the Act, no means existed of preventing them bringing the matter before the Court. But if the Department definitely demanded duty calculated on a value which included the buying commission, Woolworths Ltd. would become entitled to pay the duty under protest and then sue for its recovery.

No doubt in such an action it would be incumbent upon Woolworths Ltd. affirmatively to prove the genuineness of the buying commission, but apparently the Customs Department was unwilling to incur the risk of their succeeding in doing so. In this dilemma the Department resorted to the course of requiring a deposit of the difference in the amount of duty upon the terms contained in the form of security already quoted. Woolworths Ltd., in order to obtain their goods, repeatedly deposited such sums upon the terms required. They have been quite unable to obtain from the Department anything but an expression of dissatisfaction with the evidence they have produced in order to comply with the condition expressed in the security; and they have been unable to obtain any indication of what further evidence or proof is required. The Department has refused to value the goods at any greater amount than that shown upon the entry, but it has refused to deliver the goods until a deposit of the extra duty has been made, not, it is true, as duty, but as security. The result is that Woolworths Ltd. cannot obtain the goods without paying more than the amount of duty which they contend is payable, an amount which is indeed that actually levied as duty. They cannot obtain repayment of the excess because they can never satisfy the Department, and they cannot avail themselves of sec. 167 because the Department will never demand the excess as duty.

In these circumstances Woolworths Ltd. at length took the course of refusing to make a cash deposit in respect of certain goods imported and of tendering under sec. 167 the duty which would be chargeable if the buying commission upon these goods were included in the value for duty, and tendering at the same time an entry marked "Paid under protest" in conformity with sec. 167. The entry was rejected and the goods retained by the Customs Department. Thereupon Woolworths Ltd. obtained a rule nisi for a writ of mandamus which is now returnable before us.

In our opinion the fallacy in the position taken up by the Customs Department lies in supposing that by the machinery the Department has devised for the purpose of combining the powers conferred by sec. 216 and sec. 42, it may obtain money without taking the responsibility of levying it in the form of duty. The revenue which is to be protected by means of sec. 42 is the revenue from customs duty. That duty cannot be collected except by the means prescribed for the purpose. To refrain from demanding duty and at the same time to demand a deposit against that duty in case it should be demanded and then to forfeit the deposit, still without demanding the duty, is not a course open to those required to administer the Act.

In our opinion the departmental form of security is one which the Act does not authorize.

Sec. 42 enables the Department to require any security for the ultimate payment of duty found to be due. Sec. 216 enables the Collector to retain the goods pending proof, that is, during the adduction of evidence, and possibly to retain them for such a length of time as is reasonably required to make an investigation. (See per O'Connor J., Baume v. The Commonwealth[1].) But it does not entitle him to defer forever the levying of duty. Sec. 42 does entitle him to obtain money upon a condition that it shall be applied to satisfy duty if and when levied, but it does not entitle him to obtain money upon a condition that it shall belong to the Crown if the importer fails to prove to the satisfaction, not of a Court, but of the Department, that he has correctly stated the value. Such a procedure is an indirect means of imposing a tax other than that authorized by the statute.

In refusing to accept entry or duty under sec. 167, the Department was actuated not by a desire to consider further the assessment of duty, but by a desire to pursue the course it had adopted of attempting by means of exacting a cash deposit to avoid the assessment of duty at the disputed amount.

In our opinion a mandamus should issue commanding the Collector to assess the value of the goods for duty and calculate the duty thereon, and to demand such duty when calculated according to law.

The rule nisi should be made absolute with costs, for a writ of mandamus commanding the Collector to determine the value for duty of the three cases of enamel bowls imported by the prosecutor in December 1934 in the ship Kyokkoh Maru and to demand the duty therefor, and to accept payment of such duty under protest pursuant to sec. 167 of the Customs Act 1901-1930 if payment of any part thereof is so tendered, and to pass an entry of the goods accordingly.

The rule involves the same considerations as are dealt with in R. v. Collector of Customs (Vict.); Ex parte Berliner[2], and the facts are indistinguishable. The directions sought by this rule are also inadmissible, but the Court can mould them. The rule should be absolute for a mandamus to the Collector to consider and examine the entry of the goods ex the Kyokkoh Maru which is in contest in this case, and to ascertain and claim the duty payable in respect of such goods.

Rule nisi absolute with costs for a writ of mandamus commanding the Collector to determine the value for duty of the three cases of enamel bowls imported by the prosecutor in December 1934 in the ship "Kyokkoh Maru" and to demand duty therefor and to accept payment of such duty under protest pursuant to sec. 167 of the Customs Act 1901-1930 if payment of any part thereof is so tendered and to pass an entry of the goods accordingly. Respondent to be given thirty days within which to comply with the order with liberty to make application to a single Justice in Chambers for directions in case of difficulty in applying the judgment to any particular case.

Solicitors for the applicants, Ernest Cohen & Linton.

Solicitor for the respondents, W. H. Sharwood, Commonwealth Crown Solicitor.

[1] (1906) 4 C.L.R., at pp. 120-123.