Reynolds Australia Alumina Ltd & Ors v The Commissioner of Taxation [1987] FCA 127

R. v. Coldham; Ex parte The Australian Workers' Union (1983) 153 C.L.R. 415

Federal Commissioner of Taxation v. Henderson (1943) 68 C.L.R. 29

Federal Commissioner of Taxation v. Hamersley Iron Pty. Ltd. (1980) 33 A.L.R. 251; (1981) 37 A.L.R. 595

Federal Commissioner of Taxation v. Broken Hill Proprietary Company Limited (1969) 120 C.L.R. 240

Federal Commissioner of Taxation v. ICI Australia Ltd. (1972) 127 C.L.R. 529

Utah Development Co. v. Federal Commissioner of Taxa (1975) 5 A.L.R. 474; (1976) 9 A.L.R. 660; (1976) 50 A.L.J.R. 678

Northwest Iron Co. Ltd. v. Federal Commissioner of Taxation (1985) 85 A.T.C. 4316; (19986) 64 A.L.R. 436

R. v. Drake-Brockman; Ex parte National 011 Pty. Ltd. (1943) 68 C.L.R. Sl

Ready Mixed Concrete (Victoria) Pty. Ltd. v. Commissioner of Taxation (1969) 118 C.L.R. 177

Moreton Central Sugar Mill Co. Ltd. v. Commissioner of Taxation (1967) 116 C.L.R. 151

Norton Harvesters Pty. Ltd. v. Federal Commissioner of Taxation (1974) 74 A.T.C. 4080; (1974) 48 A.L.d.R. 332

Davis Co-op and Co. Ltd. v. Federal Commissioner of Taxation (1949) 77 C.L.R. 299

REYNOLDS AUSTRALIA ALUMINA LTD. , THE SHELL COMPANY OF AUSTRALTA LIMITED, B.H.P. MINERALS LTD.,

KOBE ALUMINA ASSOCIATES (AUSTRALIA) PTY. LIMITED and WORSLEY ALUMINA PTY, LTD.

THE COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

) ) WESTERN AUSTRALIA DISTRICT REGISTRY ) W.A. No. G@ 45 of 1986 ) )

REYNOLDS AUSTRALIA ALUMINA LTD., THE SHELL COMPANY OF AUSTRALIA LIMITED, BHP MINERALS LTD. , KOBE ALUMINA ASSOCIATES (AUSTRALIA) PTY. LIMITED and WORSLEY ALUMINA PTY. LTD.

Applicants and THE COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA Respondent

THE COURT DECLARES THAT none of the applicants is liable to pay sales tax in respect of any constituent part of an overland conveyor between the Worsley Mine site at Mt. Saddleback in the State of Western Australia and the Worsley Refinery site near Worsley in the said State purchased or applied to its own use by Worsley Alumina Pty. Ltd. as manager of Reynolds Australia Alumina Ltd., The Shell Company of Australia Limited, BHP Minerals Ltd. and Kobe Alumina Associates (Australia) Pty. Limited as participants in the Worsley Joint Venture.

(Settlement and entry of Orders 1s dealt with in 0.36 of the Rules of Court.)

WESTERN AUSTRALIA DISTRICT REGISTRY W.A. No. G 45 of 1986

REYNOLDS AUSTRALIA ALUMINA LTD., THE SHELL COMPANY OF AUSTRALIA LIMITED, BHF MINERALS LTD., KOBE ALUMINA ASSOCIATES (AUSTRALIA) PTY. LIMITED and WORSLEY ALUMINA PTY. LTD.

Applicants and THE COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA Respondent

A. INTRODUCTION The issue raised by these proceedings, commenced in the High Court of Australia but remitted to the Federal Court

under 5.44 of the Judiciary Act 1904, is whether the

applicants or any of them are liable to pay sales tax in

respect of any constituent part of an overland conveyor

between the Worsley Mine site at Mount Saddleback in the State of Western Australia and the Worsley Refinery site near Worsley in that State purchased for or applied to its own use by Worsley Alumina Pty. Ltd. as the manager of the other four applicants as participants in the Worsley Joint Venture. In particular, the applicants are seeking a declaration that the constituent parts of the overland conveyor, or alternatively some of them were, at the relevant time, exempted from sales

tax by the provisions of the Sales Tax (Exemptions and

Classifications) Act 1935 and in particular by the provisions of Item 14(1) or of Item 113C of the First Schedule to that Act. The effect of these provisions, 1f applicable, is to exempt the applicants and each of them from liability to pay

tax umder one or more of the Sales Tax Assessment Acts with

respect to constituent parts of the overland conveyor. The details of the tax liability, 1f any, are not raised in these proceedings but the Court was informed from the bar table that the total amount of sales tax involved is of the order

B. THE GENERAL ISSUES For present purposes, under Item 14, sales tax is

"14. (1) Machinery, implements and apparatus (other than road vehicles of the kinds ordinarily used for the transport of persons or the transport or delivery of goods, or parts for those road vehicles), for use in the mining industry in carrying out mining operations or ain the treatment of the products of those operations

For present purposes, under Item 113C, sales tax is not

"113C,. Goods (other than lubricants) applied by a registered person to his own use as aids to manufacture (as defined by regulations made under the Sales Tax Assessment Acts) or as auxiliaries to aids to manufacture (as 50 defined)."

It is noted that prior to 24 August 1983, the provision "(other than lubricants)" was not present. Reference will be

Made later to the definitions referred to in Item 113C.

The pleadings in these proceedings gave no indication of the extensive nature of the evidence to be led at the trial. The following facts are admitted by the pleadings. Each of the five applicants is incorporated. The first four applicants are members of a joint venture ("the Joint Venture") named the Worsley Joint Venture, which carries on the business of mining bauxite and refining it into alumina in the Darling Ranges in Western Australia. The fifth applicant ("Worsley Alumina") has exclusive possession of the Joint Venture assets for the purpose of managing the said business by virtue of a management agreement entered into between the members of the Joint Venture on the one part and Worsley Alumina on the other part dated 7 February 1980.

Worsley Alumina is a registered person pursuant to and within

the meaning of the Sales Tax Assessment Act (No. 1) and

associated legislation relating to the imposition and

collection of and exemption from sales tax. Worsley Alumina, as Manager as aforesaid for the purpose of carrying on the said business constructed certain mine facilities, constructed an alumina refinery and constructed between the

mine facilities and the refinery an overland conveyor

facility for bauxite. Since then, Worsley Alumina has carried on the business of mining bauxite and refining it into alumina. The constituent parts of the overland conveyor facility were purchased by Worsley Alumina (in its capacity as manager aforesaid) from Raymond Engineers Pty. Ltd. and Cable Belt (Australia) Pty. Utd. and applied by it (in that

Capacity) to 1ts own use on or about 13 March 1985.

From the submissions of counsel for the applicants and by counsel for the respondent, the following facts are not in dispute with respect to Item 14(1). The proceedings relate to machinery, implements and apparatus used in the construction of the overland conveyor facility ("the Conveyor"). The particulars of those goods are not relevant for the purposes of these proceedings. Mining operations are conducted only at the mine facilities at Mount Saddleback ("the Mine Site"). Bauxite is recovered from the ground at the Mine Site and the recovery of bauxite at the Mine Site constitutes mining operations in the mining industry. Bauxite, being the product of those mining operations, is treated at part of the alumina refinery at Worsley ("the Refinery") some 51 kilometres distance by the Conveyor from the Mine Site and in a south westerly direction from the Mine

Site. The Conveyor connects the Mine Site and the Refinery

and is used to convey the bauxite recovered from the mining operations at the Mine Site to the Refinery where the bauxite is treated. Although the respondent concedes that the relevant machinery, implements and apparatus used in the construction of the Conveyor was for use in the mining industry, he denies they were for use in carrying out mining operations and he denies they were for use in the treatment of bauxite being the product of the mining operations at the Mine Site. Thus the question arising under Item 14(1) is whether, on the facts of this case, the transporting of the bauxite by the Conveyor from the Mine Site to the Refinery constitutes within the mining industry either mining operations or treatment of bauxite. An affirmative answer to either of those questions would result in the applicants succeeding in these proceedings. A negative answer to both of those questions would result in the applicants failing in

Further or in the alternative, the applicants claim exemption from liability for sales tax under Item 113C. That Item has been set out earlier in these reasons. For the purposes of this case, the exemption applies if the relevant goods were applied by Worsley Alumina as aids to manufacture, as defined, or as auxiliaries to aids to manufacture as defined. The definitions are contained in Reg.4(1) of the Sales Tax Regulations. The relevant parts of the definition of "aids to manufacture" in operation at the relevant time

registered person in the course of carrying on a business (where that use 15 exclusively, or primarily and principally, for the purposes of that business), being -

{a) machinery, implements and apparatus for use exclusively, or primarily and principally -

(i) in the actual processing or treatment of goods to be used in, wrought into or attached to goods to be manufactured;

(ii) in any processing or treatment by which the goods to which that processing or treatment is applied are used in, wrought into or attached to goods to he manufactured;

(1ii) ain any processing or treatment for the purpose of bringing goods into, or maintaining goods in, the form or condition in which they are to he marketed or used by the manufacturer of the goods; ...

(viii) in the transportation, within premises in which any activity is carried out by him as specified in this paragraph (not being an activity carried out by the use of machinery, implements or apparatus expressly excluded from this

definition) of goods in relation to which that activity has been, is, or is

(ix) in the storage, within premises in which any activity 1s carried out by him as specified in this paragraph (not being an activity carried out by the use of machinery, implements or apparatus expressly excluded from this definition) or premises contiguous to such premises of goods in relation to which that activity is to be carried out by him; ... ."

Reference should be made also to the following definition

"goods to be used in, wrought into or attached to goods to be manfactured" means goods to be so used or dealt with that those goods, or some essential clement thereof, will form an integral part of the goods to be manufactured; ."

The question arising under Item 113C is whether the machinery, implements and apparatus used by Worsley Alumina, which is a registered person, in the construction of the Conveyor were used as aids to manufacture in the transportation, within premises in which bauxite was mined and refined to produce alumina, of goods in relation to which that activity is to be carried out by Worsley Alumina. The answer to this question depends upon a consideration of all

At the hearing, much oral evidence was led by the applicants. The witnesses called by the applicants were cross-examined in detail. In addition, a large number of exhibits were tendered in evidence. The respondent called no witnesses and tendered no exhibits. Some documents prepared by the respondent were in fact tendered by the applicants. All parties co-operated to ensure all relevant factual material was before the Court. At the request of the parties I inspected the Mine Site, the Conveyor and the Refinery. Counsel agreed that I could use the inspection as evidence in the sense of treating as evidence what I saw on the

inspection. The inspection occurred before the first witness

called to give evidence had completed giving his evidence. Matters noted during the inspection were made the subject of oral and exhibit evidence. Accordingly, I do not use as evidence what I saw during the inspection. Nevertheless, the inspection was of enormous assistance in an understanding of the evidence given in Court and in an understanding of the

From the final submissions made by counsel, it became apparent that there was no real dispute about the facts. The effect of some of the documents in evidence was in dispute and the application of the law to the facts was

Bauxite is the common name given to a rock like substance consisting basically of alumina tri-hydrate and other substances which, for present purposes can be described as mud, and has the chemical formula Al,0, .3H,0. Alumina

tri-hydrate is commonly known as gibbsite. Bauxite is the

basic material used in a refining process to produce aluminium oxide, sometimes described as anhydrous aluminium oxide. Aluminium oxide is commonly known as alumina and has the chemical formula Al1,0,. Alumina is the basic material used in a smelting process to produce aluminium which has many and varied uses in modern society. Gibbsite, alumina and aluminium are each metals. This case concerns gibbsite

and alumina only although some mention is made later to the

third métal, aluminium, with respect to its smelting and its

The amount of gibbsite in bauxite varies from region to region as well as within regions. In the understanding of persons engaged in the business of mining bauxite and refining it into alumina, the greater proportion of gibbsite ain bauxite, the richer the bauxite. The mud content of bauxite comprises waste for which, at present, there i5 no commercial use. It is economically feasible to transport by ship bauxite rich 1n gibbsite or in other words high grade bauxite to sites far removed from mining operations in order to refine alumina at those sites. It is not economically feasible to 50 transport by ship bauxite poor in gibbsite or in other words low grade bauxite, since that involves the transport of large quantities of mud from which small quantities of alumina can be refined. The bauxite deposits at Gove in the Northern Territory and at Weipa in Queensland are high grade in that bauxite mined at those sites comprise some 45% gibbsite. Large amounts of bauxite are shipped from those areas although some is refined

Large deposits of bauxite exist in the Darling Ranges in Western Australia. Generally, these deposits comprise low grade bauxite containing some 30% gibbsite. It is not economically possible to transport by ship the bauxite from these deposits since any cargo so carried comprises some

70% of mud which is a waste material. It was only during the

1950's that it became recognised that the bauxite in the Darling Ranges could be exploited commercially. Thereafter, with the active support of the State of Western Australia, various companies became involved in proposals for the mining of bauxite and its refining into alumina. The Alumina

Refinery (Bunbury) Agreement Act 1970 was enacted, as its

"to ratify an Agreement between the State and Alwest Pty. Limited for the establishment of a refinery at or near Bunbury to produce alumina and for incidental and other purposes."

The Act ratified that agreement which is dated 19 November

13970 and is contained in the Schedule to the Act. The

"WHEREAS the State has agreed to grant to the Company the right to maine bauxite and the Company has undertaken to process that bauxite into alumina, or to arrange for such processing to be carried out by another company approved by the Minister and, subject to the provisions of this

Agreement, at a refinery to be erected at or near Bunbury in the said State and also, possibly, at

another refinery to be erected at some other place within the said State."

"'bauxite' means ore which either with or without crushing washing and screening 18S sold as bauxite or is used for processing into alumina;."

The agreement contains provisions relating to special grade

bauxite, which 1s defined to mean expressly high grade bauxite, but for the purposes of these proceedings no further

Under the agreement, Alwest Pty. Limited covenanted with the State, aS soon as reasonably possible, to do a number of things including to commence the construction of a refinery at or near Bunbury and to produce specified amounts of alumina, to transport bauxite mined from mining leases to be granted to it to the refinery and for that purpose to construct along a route approved by the relevant Minister of the Crown an appropriate conveyor or pipeline between the Mineral lease area and the refinery and to pay to the State a royalty on all alumina produced at the refinery. The agreement imposed obligations upon the State including an obligation to grant a mineral lease to Alwest Pty. Limited to enable it to mine bauxite to be used in the refining and in sO mining to be subject to special conditions which need not be referred to in these reasons, to acquire land to enable Alwest Pty. Limited to perform its obligations under the agreement including the provision of land to enable Alwest Pty. Lamited to construct, install, establish, operate and Maintain "a pipeline or conveyor for the transport of bauxite

The venture envisaged by that Act involved two main aspects, namely the mining of bauxite and the refining of Bauxite anto alumina. Following the agreement, further investigations were carried out concerning the feasibility of the proposed venture, how 1t should be established and who should carry out the venture. Additional companies became involved. The site of the refinery was changed to a site near Worsley, inland from Bunbury and situated in the Darling Ranges. The site was nearby to Collie, at which coal was produced, and was close to the rail line connecting Collie to Bunbury. Coal was needed to fuel the furnaces necessary to provide energy sources used in the mining and refining operations including the transport of the bauxite on the Conveyor. In addition, the site was suitable for the supply of water necessary in the refining process and for the disposal of the mud, known as red mud, removed from the

of an Agreement with Alwest Pty. Limited and Dampier Mining Company Limited relating to the establishment at or near Worsley of a refinery to produce alumina and for incidental and other purposes."

The new agreement was executed by the parties, and is set out in the Schedule to the Act. The 1973 Act repealed the

Alumina Refinery (Bunbury) Agreement Act 1970. The new

agreement is in similar form to the earlier one. The

recitals to the agreement refer to the earlier agreement, to the interests of the new companies in a joint venture, to the suitability of the Worsley site for use as a refinery and the reserves of bauxite available to be used to recover bauxite for refining at the refinery site. The word "bauxite" has the same meaning. Mining leases are to be given to the joint

venturers to enable them to conduct mining operations subject

to special conditions. In the agreement, and subject to context:- c "'yefinery' means a refining plant established

pursuant to this Agreement in which bauxite is treated to produce alumina;."

Under the agreement, the obligations of the joint venturers and of the State are similar to the obligations contained in the earlier agreement. The joint venturers were to commence construction of the refinery at the site near Worsley with a specified capacity, to transport the bauxite mined within the mineral lease to the refinery and to transport the alumina

produced at the refinery to the port of Bunbury for shipping.

The joint venturers were to construct the appropriate conveyor or pipeline to enable the bauxite to be transported to the refinery and to construct rail links to enable coal and other materials for use at the refinery site to be brought to the site and to enable the alumina to be taken to the port of Bunbury. The joint venturers were required to pay royalties based on the amount of alumina

refined at the refinery. Except with the consent of the

Minister, all bauxite, other than special grade bauxite, mined by the joint venturers, was to be used in the

manufacture of alumina and associated chemicals and

As in the earlier agreament, the State was to take all steps necessary to enable the joint venturers to construct, install, establish, operate and maintain the pipeline or conveyor. The agreement contained detailed provisions concerning conservation matters relating to the environment both at the mining areas, the conveyor areas and

Since 1973, a number of alterations have been made to the agreement contained in the 1973 Act. These

alterations are ratified by the Alumina Refinery (Worsley)

Agreement Act 1978 and the Alumina Refinery (Worsley)

Agreement Act 1982. The agreement contained in the 1982 Act names the first four applicants to these proceedings being the Joint Venturers, as the parties of one part to the agreement set out in the 1973 Act as varied by the latter two Acts. It is mot necessary to refer to the details of the amendments to the agreement, but it is noted that under those amendments, the State acquired greater control over

The Worsley Joint Venture Agreement was entered into by the Joint Venturers on 7 February 1980. The Joint

Venture Agreement 1s a lengthy document containing detailed

provisions relating to the construction, development, operation and maintenance of the Worsley project. The

project includes all the mining leases and other interests in land vested in the Joant Venturers and all buildings, structures, fixtures, improvements, plant, equipment or works relating to the project and in particular includes the bauxite mine, facilities at the Mine Site for the handling and crushing of bauxite, facilities for the transportation of bauxite from the Mine Site to the Refinery and the facilities at the Refinery. Under the agreement, the Joint Venturers agree that they have associated themselves in the Joint Venture with the objective, inter alia, of developing the

"so that it will be sufficiently completed to allow production of Sandy Alumina in substantial quantities on a regular basis."

It 1s noted that sandy alumina is alumina in a fine granular form as distinct from a powdery form. The latter form gives rise to environmental and health problems. The project was to be developed in conformity with the Alumina Refinery

(Worsley) Agreement Acts and the agreements contained in the

Contemporaneously with the execution of the Joint Venture Agreement, the Joint Venturers entered anto the Management Agreement with Worsley Alumina which is controlled by the Joint Venturers. The Management Agreement 1s not in

evidence before the Court but it 15 agreed that Worsley

Alumina has exclusive possession of the Joint Venture assets for the purpose of managing the business of mining bauxite

and refining 1t anto alumina pursuant to the Alumina Refinery

(Worsley) Agreement Acts and the agreements contained in the

Schedules of those Acts and in conformity with the Joint

The Mine Site is situated in the Darling Ranges near the township of Boddington which is some 135 kilometres south-east of Perth. The Mine Site is situated on land held by the Joint Venturers under Mining Lease No. 258 S.A. dated 16 August 1983 and granted pursuant to the Mining Act 1978

and the Alumina Refinery (Worsley) Agreement Act 1973. The

Mining Lease relates to a very extensive area of land in the Darling Ranges and authorises the Joint Venturers to mine for bauxite which is vested in the Joint Venturers. The rents and royalties to be paid by the Joint Venturers are those imposed by the Worsley Agreements being those contained in

the Schedules to the Alumina Refinery (Worsley) Agreement

Acts. The royalties are based upon the volume of alumina produced at the Refinery. Part of the Conveyor is

The Conveyor is constructed along a corridor of land connecting the Mine Site and the Refinery. The Joint Venturers own the freehold of some of that land while the balance is land held by the Joint Venturers under Crown Lease

No. 3116/8513 dated 16 August 1986 and granted pursuant to

the Land Act 1933 and the Alumina Refinery (Worsley)

Agreement Act 1973. This lease is granted for the purpose of

enabling the Joint Venturers to construct and operate a conveyor for the transport of bauxite from the Mining Lease area to the Refinery site and for ancilliary and incidental purposes at an initial rental of $5,000 per year and for a term commencing 28 October 1980. This lease was not granted formally until after the construction of the Conveyor. Initially at the hearing of these proceedings, discussion took place concerning this aspect, but in the result the respondent accepted the issues should be tried on the basis that the Conveyor was constructed on land either owned in fee simple by the Joint Venturers or occupied by them under this Crown Lease. It should be noted that the corridor of land over which tha Conveyor operates 1s subject to a Mining Lease granted to a Company unconnected with the Joint Venturers, but in my opinion, nothing turns upon that fact. This lease does not authorise the Joint Venturers to mine bauxite in the Conveyor land corridor. The Conveyor land corridor is not in a straight line from the Mine Site to the Worsley Refinery. This 1s the result of environmental considerations. As a result, the Conveyor is in two parts, Flight 1, which 15 some

30 kilometres long, and Flight 2, which is some 21 kilometres

The Refinery is situated on land held by the Joint Venturers under two Crown Leases numbered 3116/7574 and 3116/8072 respectively and dated 6 February 1981 and 19 March

1982 respectively and granted pursuant to the Land Act 1933

and the Alumina Refinery (Worsley) Agreement Act 1973. These

leases are granted for the purpose of the Joint Venturers constructing and operating an alumina refinery thereon and for ancilliary and incidental purposes thereto, including the disposal of the red mud, at a peppercorn rant. The Refinery site comprises the Refinery and ail associated works ancluding a reservoir, a dam, the red mud disposal area,

Yailway tracks and many other facilities. Part of the

A brief description only is needed to describe the activities carried on at the Mine Site, the Refinery and on the Conveyor corridor. The Mine Site is within a compound, entry to which is controlled. The method used in recovering the bauxite has the appearance of quarrying but traditionally has been called mining. The bauxite to be mined is contained in discrete areas called pods. The pods are covered by a shallow overburden of top soil and gravel. Normally, the top of the bauxite pod comprises "hardcap" bauxite which requires

to be blasted. Below the hardcap, there exists friable

bauxite which can be removed without blasting. Through the bauxite there may be pockets of clay bands containing reactive silica which causes problems in the refining processes. The floor of the bauxite comprises clay containing reactive silica. The floor is uneven and clay Pinnacles often protrude into the bauxite. The quality of the bauxite varies between different pods and within pods.

Detailed drilling on a grid basis to determine the depth and

quality of the bauxite in each pod has been carried out and the results recorded. A typical test bore could show an overburden of 1 metre, a bauxite hardcap of 1 metre, friable bauxite of some 4.5 metres and then the clay. The percentage of gibbsite in the bauxite could vary from 21.7% to 32.8% while the percentage of reactive silica could vary from .7% to 2.6%. In the refining process it is important that the bauxite being fed into the process should as far as possible contain the same percentage of gibbsite, namely 30.7%, and as far as possible, a constant percentage of silica. Any variation from the standards set cause problems in the refining process. The methods by which the standards are Maintained is called blending. As will be described later, the blending process commences at the Mine Site and the results of the tests bores form the basis on which part of

In the mining process, the overburden is removed, and stockpiled and stored for reclamation purposes. Where necessary, the hardcap bauxite 1s blasted. Large rocks are broken by a heavy mechanical hammer. The bauxite is then loaded into dump trucks. The loader operator has a "picture" of the pod on which he is operating derived from an examination of the test bore records. In addition, he exercises visual care to avoid loading clay from any pinnacle and from any clay bands and from the clay at the floor of the Bauxite. The bauxite is taken to the primary crusher and tipped into a surge hopper with a capacity of about 150

tonnes. The crushed bauxite is then carried by a conveyor

belt to the secondary crusher and fed into the surge bin which has a capacity of some 3,000 tonnes. The bauxite, which has been crushed to a size compatible for carriage on the Conveyor is then fed by a conveyor to a surge pile which has a "live" capacity of some 3,000-9,000 tonnes and a "dead" capacity of some 40,000 tonnes. The bauxite 1s recovered from the surge pile by means of feeders placed under its base. The bauxite is fed onto the surge pile from a fixed point high above the feeders. If the feeders are closed and the surge pile 1s constructed, it appears as a giant cone pointing to the = sky. When the feeders are opened, the bauxite from the middle of the base is removed by force of gravity resulting in the surge pile being reduced in the centre but retaining its outside rim thereby taking on the appearance of a volcano with a hollow centre. The outside walls of the surge pile, referred to as the dead capacity, can be pushed inwards and so be fed into the feeders. The feeders are controlled from the secondary crusher but' the yate of flow 1s controlled from the control room at the Refinery. From the feeders, the bauxite 1s fed onto an accelerator belt and from there is fed onto the overland conveyor belt being Flight 1 of the Conveyor. The speed of the accelerator belt and the conveyor belt are controlled from the control room at the Refinery. If for any reason the Conveyor stops, all conveyors, including the accelerator belt, stop automatically and the feeders under the surge pile close. This safety mechanism prevents bauxite piling up on the Conveyor. The withdrawal rate is normally about 2,040

tonnes per hour. The bauxite normally takes some two and a

quarter hours to travel from the Mine Site to the Refinery, the conveyors travelling at about 22 k.p.h. The total weight of bauxite on the conveyor belts when fully operational is about 5,000 tonnes. Normally two shifts a day on anine day fortnight are worked on the Mine Site. When necessary, additional work is done outside the normal shifts. Maintenance work is done outside the normal shifts as well as

The point at which the bauxite is fed onto the overland conveyor belt, Flight 1, is on the Mine Site. The Conveyor continues over the Mine Site for some distance and then enters upon the Conveyor corridor. The Conveyor corridor traverses rough and hilly country. It passes through State forests. It crosses rivers and some roads. At some times the Conveyor goes underground while at other times it is built up on viaduct like bridges to traverse a river or a valley. It is not level but, except in the cases

A roadway is built alongside the Conveyor. This is a private roadway used by and with the permission of Worsley Alumina. The Conveyor corridor is not fenced. When it crosses roads, fences have been built along the road boundaries and then back some distance into the forest on each side of the Conveyor corridor. Locked gates exist to enable traffic using the private roadway to cross the other

roads. The fences are designed to prevent unauthorised

persons from entering the Conveyor corridor. The roadway 1s used for the purpose of inspecting and maintaining the Conveyor and for access between the Mine Site and the Refinery and any place between the two. Safety mechanisms allow the conveyor belt being stopped by action taken at any Place along the Conveyor. In addition, cables for communication purposes extend over the conveyor corridor. The power lines providing the electricity for use at the Mine Site extend along the Conveyor corridor. In addition, there is a micro-wave communication system between the Refinery and the Mine Site but this 1s on a direct line of sight course

and does not follow the line of the Conveyor corridor.

The overland conveyor consists of a cable belt system where the belt which carries the bauxite rests on steel cables to which the power 1s applied to move the belt. The cables are supported by pulley wheels fitted onto the conveyor system. The belt is covered by a roof to prevent pollution and to prevent the bauxite becoming wet from rain while being conveyed to the Refinery. The Conveyor is designed to allow fauna to move from one side of it to the

Normally, the Conveyor operates only while the bauxite is being fed onto the surge pile. If any breakdown Occurs at the Mine Site, the dead capacity of the surge pile may be pushed in to feed the Conveyor. Maintenance on the Conveyor 1s done both while the Conveyor is operating and

while it 15 idle. Normally, the bauxite is not removed from

the Conveyor before it 15 stopped. It takes about 45 minutes to bring the Conveyor from a stationary position to its

The overland conveyor cable belt used on Flight 1 of the Conveyor 1s powered by electric motors situated at the end of Flight 1 nearest to the Refinery. The electricity used for driving the motors 1s provided by the Power Station at the Refinery. The housing for the motors is built on the Conveyor corridor. Flight 1 of the system extends in a straight line from the Mine Site to the transfer point at the end of Flight 1. At the transfer point the bauxite is fed from the cable belt used on Flight 1 to the cable belt used on Flight 2 which then continues in a straight line, but ina different direction to Flight 1, to the Refinery. It continues along the Conveyor corridor until it reaches the Refinery site. It continues over part of the Refinery lease area until it reaches the end of Flight @. The electric motors used to drive the cable belt on Flight 2 are situated

Nothing is done to the bauxite while it 15 travelling on the conveyor belts. The Conveyor is used solely for the purpose of transporting bauxite from the Mine

As the bauxite arrives at the Refinery, samples are taken every 15 to 20 minutes by an automatic mechanism. These samples are tested to determine the quality of the bauxite. The bauxite, after arrival at the Refinery, 1s fed onto one of four stockpiles on the Refinery site. Each stockpile has a capacity of about 100,000 tonnes. The method of stacking the stockpiles and the recovery of bauxite from the stockpiles complete the blending process of the bauxite prior to it being fed into the refinery process. Each stockpile 15 constructed by a moving loading arm on a loading mechanism which travels lengthways along the length of the stockpile. Each stockpile 15 rectangular in shape at the base with a gabled top, each gable extending to the base of the stockpile. To construct the stockpile, the loading arm is lowered and the bauxite 1s fed onto the centre of the base while the loading mechanism traverses the length of the stockpile. The loading mechanism then traverses backwards and forwards and then as the pile increases in height, the

loading arm is raised. This process places the bauxite in

thin layers over the length of the stockpile. Each stockpile is over 10 times larger than the live capacity of the surge Pile at the Mine Site and thus there is no undue concentration of bauxite from any part of the surge pile

The bauxite 1s recovered from the stockpiles by a bucket wheel which recovers the bauxite from across the marrow face of the stockpile. The bucket wheel traverses the narrow face and proceeds upwards across the face of the stockpile thus cutting across layers of bauxite as contained in the stockpile. The recovery of the bauxite completes the

From the analysis made of the samples of bauxite taken when the bauxite arrives at the Refinery, the quality of the bauxite being used to construct the stockpiles is ascertained. From the information so obtained, instructions are sent to the Mine Site as to the quality of bauxite to he used in further deliveries of bauxite to ensure the correct blend of bauxite in the stockpiles. These instructions are used to direct the recovery of bauxite from particular pods or particular parts of particular pods so that the proper blending of the bauxite may be maintained. In this sense, it is true to say that the blending process commences at the

Mine Site with the removal of the bauxite from the pods.

At the Refinery, alumina is refined from the bauxite by using the Bayer process. Broadly speaking, that process involves digestion, separation, precipitation and calcination. The Bayer process is most complex involving the use of large amounts of water and heat. It involves chemical changes brought about by the mixture of different materials to react chemically under heat and pressure. It 15 not

necessary in these proceedings to describe the details of the

process. Tt ais sufficient to say that the bauxite is recovered from the stockpiles at the Refinery and carried by conveyor to the bauxite grinding equipment. At recovery, the bauxite in theory, has been blended to the required quality, viz 30.7% gibbsite. Any substantial variation from that quality will cause problems and difficulties in the refining process. The bauxite as first ground to a powder. Thereafter there are four separate stages where significant chemical changes occur. These four stages have been described earlier in these reasons as digesion, separation, precipitation and calcination. At the digestion stage, the gound bauxite is mixed with sodium hydroxide, commonly known a5 caustic soda, which has the chemical formula NaOH. The caustic soda reacts with the gibbsite to produce sodium aluminate and water, the chemical process being 2Na0H + Al,0,.3H,0 » 2NaA1O, + 4H,0. The chemical formula of sodium aluminate is NaAlO,. As a result of this process, gibbsite, viz, alumina tri-hydrate, disappears and a new compound sodium aluminate is produced. This new compound forms part of the mixture of the mud from the bauxite including the Sllicates. In the same process, another chemical process occurs. The caustic soda tends to react with carhon dioxide contained 1n the mud and the atmosphere to produce sodium carbonate. Lime is introduced into the process to react with the sodium carbonate to produce sodium hydroxide and calcium carbonate. A separation process occurs as the mud, including the calcium carbonate, together with other impurities is removed from the mainstream. The main volume of material s0

removed is the red mud which is directed to the red mud

disposal unit and area by methods which need not be

The next stage 15 precipitation. There the sodium aluminate, under different conditions, reacts with water to produce alumina tri-hydrate and sodium hydroxide; the chemical change being 2NaAl0, + 4H,0 - Al,0,.3H,0 + 2Na0OH. Alumina tri-hydrate has been produced but in a pure form, not being mixed with all the impurities contained in bauxite. Ground Worsley bauxite has a russet colour appearance. Ground red mud has a darker russet appearance. The alumina tri-hydrate, after precipitation, has a cream coloured appearance. If this form of alumina tri-hydrate were mixed with the ground red mud in the proportions 30 to 70, the resultant mixture should have the same colour as ground

The next chemical reaction occurs at the calcination stage. At this stage, the alumina tri-hydrate is treated at high temperatures to break its molecular bond with the water. The chemical process produces aluminium oxide and water, the formula being Al,0,.3H,0 % Al,O, + 3H,O. It will be remembered that aluminium oxide is commonly called alumina. It is a white substance with the chemcial formula Al,0,. The alumina is then stored pending rail transport to Bunbury. Alumina is not readily soluable and is used in a smelting process to produce aluminium. Any water molecules present at the time of smelting would be very dangerous.

That is why alumina tri-hydrate cannot be used in the

smelting process. Thus the alumina must be refined to a very

Normally, the refining process operates on a 24 hours 7 days a week basis. The stockpiles of bauxite, when built to their full extent, contain enough bauxite to serve

the refining process for about a month. This reserve of blended bauxite operates as a safety buffer for the refining

I turn to consider whether Item 14(1) applies to exempt the applicants from liability to pay sales tax on the yelevant machinery, implements and apparatus used hy Worsley Alumina in the construction of the Conveyor ("the machinery etc."). The respondent admits that the Joint Venturers and Worsley Alumina carry on the business of mining bauxite and refining it into alumina. The respondent concedes, quite correctly in my opinion, that the machinery etc. was for use in the mining industry, but it is necessary to consider what the words "mining industry" mean in the context of Item

The word "industry" 1s not a precise technical term. The word has been considered on many occasions by the High Court but reference need be made to a few only of those authorities. The words "the Coal Mining Industry" as

appearing in the National Security Regulations, were

considered in Rk. v. Hickman; Ex parte Fox and Clinton (1945)

70 C.L.R. 898 and R. v. Central Reference Board; Ex parte

Theiss (Repairs) Pty. Ltd. (1948) 77 C.L.R. 123. Ido not propose to quote at length from the judgments in Hickman, but reference is made to what Latham C.J. said at pp.608-609 and to what Dixon J. said at pp.613-614. In Theiss, Dixon J.

"The meaning of 'Coal Mining Industry' is unfortunately indefinite and flexible. It affords no clear and certain guide either to the Board or to the courts of law as to the exact ambit of the Board's authority. In the present case the coal-mining that affects the question for decision is done by an open cut, and we are told that, owing to the short period over which that method has been seriously practised in New South Wales, no usages or common understandings have been established which would assist us in determining what marginal functions and activities fall within an accepted conception of that branch of the coal-mining industry.

The function or activity with which we are concerned is the major repair and overhaul of the earth-moving and excavating equipment used in removing the over-burden and in winning the coal from the open cut. As a matter of reason, it seems to me that such repairs and overhauls may be carried out as an integral part of the operations of open-cut mining so as to form an indivisible element in the undertaking or may be relegated to separate and independent engineering operations

outside the undertaking. In the one case I should have thought that they might quite well be considered part of the industry. In the other case

I do not think they ought to be so considered. The difference must depend upon circumstances, the chief of which must be separateness of establishments in point of control, organization, place, interest, personnel and equipment. It must in the end come down to a matter of degree. It is not like the cases of Ex parte Fox and Clinton (1945) 70 C.L.R. 598 where the distinction rested upon the character of the operations, upon function. There we thought that the transport of

coal in distribution was to be distinguished from coal-mining as an industry.

In the present case the prosecutor has not satisfied me Ehat the major repair and overhaul of machines 15 conducted otherwise than as an integral park of the mining undertaking, because of the following factors. The operations, although carrled on by a dastinct company, are under one control and management with the mining operations

Ss The distinct company 15 a subsidiary. The works are situated close co the Open cut, about three-quarters of amile away, and the site was obvicusiy chosen for that reason. The site 15 variously described as upon the open cut, as adjacent to but outside the area of the spen cut and as upon the mine-owner's land but outside the

fence. Although some other work has oeen done, the repair and overhaul of the mining machinery was the purpose of setting up the engineering shop and substantially, it has no other present purpose. It was set up because of the inconvenience, and I would assume cost, of having the work done by outside angineering astablishments. Another workshop for minor repairs and adjustments 15 in the open cut. Though that belongs to the mining or excavating company there 15 an interchange of tools

and spare parts. The major repair and overhaul of the machines doing the mining is of course essential to the mining operation and to do it as part of the same undertaking may be considere to give all the advantages or expedition, co-ordination and reduction of cost that are suppose to arise from unity of control and

proximity. The fact that the operations of mining and of major méchanical repair are divided between distinct legal @ntities sought not, where the question 1is whether they form a main and an incidental part of the same undertaking, ta weigh against the facts that they are under one control and management and conducted in the same interest."

"The term 'industry' 15 not a precise technical term. One industry sometimes overlaps 1nto another industry. In my opinion, no absolute rule can be laid down for determining the limits of a particular andustry. The question whether a particular aindustrial operation belongs to one industry rather than another cannat be decided merely by considering the nature of that operation itself. For example, a clerk may be employed in the boot-making industry, the coal industry, the transport industry, or almost any industry. The

problems associated with the overlapping of craft and industrial unions are well known, and have to be carefully considered by industrial authorities when they are determining the terms of their

awards. In my opinion, all the circumstances of each case must be taken into account. If coal is

taken in skips by employees of colliery owners from

the pit top to a place of storage on the colliery, such work would be work in the coal mining

industry. Similarly, examples are given in affidavits filed on behalf of the respondents of Yallways, owned and controlled by proprietors of collieries and operated by employees of such proprietors, upon which coal is conveyed considerable distances to yrailway sidings or wharves. Such transport of coal may be regarded as falling within the coal mining industry."

Union (1983) 153 C.L.R. 415, the High Court had to consider whether employees of independent contractors engaged in construction works for the Worsley Project at the Mine Site, the Refinery and on the Conveyor were engaged in specified types of labour in or in connexion with the industry of "metalliferous mining". The High Court answered that question in the affirmative. Reference is made in particular to the joint judgment of Deane and Dawson JJ. commencing at

These authorities illustrate that in determining the question of what is a particular industry, consideration must be given to aspects of function, control, integration, purpose and object of the activities carried on by the relevant person engaged in that industry. In the present case, the applicants are admitted to be engaged in the business of mining bauxite and refining it into alumina. on

the facts found in this case, it is clear that the applicants

are engaged in the mining industry in carrying out their activities at the Mine Site, the Refinery and on the Conveyor. The fact that 1n addition they may be engaged in other industries at those places, does not deny the fact that in setting up and operating the Worsley Project, the applicants were and are engaged in the mining industry. There is the one employer, Worsley Alumina, the one control with respect to each of the activities carried on, the one operation identified as the Worsley Project and the one

Counsel for the respondent contended that neither of the second limbs of Item 14(1) were satisfied, namely that the transporting of the bauxite from the Mine Site to the Refinery was neither the carrying out of mining operations nor the treatment of the products of those operations. A summary of their contentions can be given by a series of

1. Mining operations are conducted only at the Mine Site and are concluded when the bauxite is recovered in manageable dimensions fit for use, transport or delivery. In this case this occurs, at the latest, when the bauxite emerges from the secondary crusher and is

The transport of the bauxite from the Mine Site to the Refinery 15 not a mining operation nor the treatment of the products of those operations. It 15 solely the transport of minerals after the mining operation has

The blending of the bauxite which occurs at the Refinery by reason of the combined effects of the stacking and reclaiming operations is not a mining operation but 1t is, nevertheless, within the second limb of Item 14(1) as being the treatment of the product of

Once the bauxite is recovered and introduced into the Bayer Process the manufacturing of alumina commences. This is a distinct and separate process from the mining operations or the treatment of the products of mining operations. This commences, at the latest, when the bauxite is fed into the grinding

of the reclaimed bauxite from the stockpile, or even as a further alternative, with the stacking of the bauxite. In the case of these two alternatives there would be some overlapping between the manufacturing process and the blending process (i.e. the treatment

6. No processing or treatment of any description (mining or manufacturing) occurs on or within

The reference in proposition 4 to the commencement of the manufacturing process to produce alumina, i5 more relevant to a consideration of the application of Item 113C and will be discussed later in these reasons. Alternatively, proposition 5 suggests that the manufacturing process commences with the stacking of the bauxite into the stockpiles at the Refinery. The emphasis on the importance of the commencement of the manufacturing process arises because it was contended that the manufacture of alumina did not constitute the treatment of bauxite and therefore it became necessary to determine when the manufacture commenced. Counsel's concession that the bauxite blending process constituted the treatment of the products of mining operations under Item 14(1) was in my opinion correct, but on the facts found, that blending process commenced with the

extraction of bauxite at a pod at the Mine Site. In any

us un event, the crux of the contentions rests upon the fact that no treatment of the bauxite occurs while it 1s being

A Major premise upon which the contentions of the respondent rests 15 that the manufacture of alumina by the Bayer Process does not constitute tne treatment of bauxite.

The acceptance of -nat premise presupposes that the Ereatment

of the product of mining operations by a chemical process cannot come within the second limb of Item 14:11). That Supposition is of doubtful value when the Refinery itself 1s an activity in the mining industry, or in other words, the carrying out of the manufacturing of alumina by the Bayer Process 15 within the mining industry. The object of the Worsley Project is 6&6 produce alumina. That object 1s achieved in the mining industry by the extraction of bauxite and the treatment of that bauxite to obtain the alumina. In this context, the fact that a chemical process was used in the production of alumina of itself would not prevent the whole process from being properly described as mining

operations; cf. Federal Commissioner of Taxation v. Henderson

The application of Item I14(1) was considered recently by the Supreme Court of Victoria in Federal

Commissioner of Taxation v. Hammersley Iron Fty. Ltd.. That

action was tried by Gobbo J. and his judgment 1s reported (1980) 33 A.L.R. 251. On appeal by the Federal Commissioner

of Taxation, the judgment of the Full Court, Lush, Kaye and

close as possible to those aimed at. That the two forms of reclaimer would have the effect, with varying degrees of efficiency, in further intermingling the component Materials of the stockpile appears to be beyond doubt as would, with its own degree of efficiency, the tunnel loading method. Moreover, the evidence leads to the conclusion that they were intended to have this effect, and that their having this effect was a part of the system by which ore was brought to uniform quality for delivery."

Commencing at p.604, Lush J. considered the application of Item 14(1). It was accepted that the relevant goods were parts for machinery "for use in the mining

"The appellant contended that they were not for use 'in carrying out mining operations', upon the ground that those operations ended, at latest, at the mine ex screenhouse stockpiles. For this, counsel relied upon FCT v Broken Hill Pty Ltd (1969) 1 ATR 40; 120 CLR 240; FCT v ICI (Australia) Ltd (1972) 3 ATR 321; 127 CLR S29 and FCT v Utah Development Co (1976) 6 ATR 233; 3 ALR 660; 50 ALUR 678. The respondent did not concede this point, but in effect conceded that its argument could not be successfully put before this court."

That conclusion was based on the fact that the end product of the operation was iron ore. In the present case, where the end product 1s alumina, different considerations might apply. For the purpose of deciding this tissue, I will assume that mining operations ended, at the latest, when the bauxite was

His Honour, commencing at p.604, then considered the application of the second limb of Item 14(1), namely were the parts for machinery for use in the treatment of the products of mining operations. This involved a consideration

of the words "for use an" in relation to "the treatment" of products. These matters were not in issue before me. After referring to a number of authorities, His Honour said at

"Tn deciding this issue, it 15 necessary to decide what are the 'products of mining' which are under discussion. For the Commissioner, it was argued that the products were the individual pieces of ore emerging from the tertiary crusher, and it followed that these were virtually unchanged except by an inevitable process of degradation in handling until they were shipped. For the respondent, it was contended that the product was bulk iron ore, which was changed by being brought toa desired state of low variability.

The respondent's argument identifying the product should be upheld. Support for it may be found in Hudson's Bay Co v Thompson £19601 AC 926, and the cases there cited, in which, the relevant question being whether goods had been 'adapted for sale', 1t was held that the goods to be considered were not the individual items, but either the general bulk or the unit sold. The adoption of this view goes far to deciding the item 14 issue. The goods, so identified, are shown by the evidence to have been subjected to a desired change. If a chemical change is sought, the change wrought in the goods 1s a reduction of variability in the concentration of chemicals throughout the ore. if a change in form, nature or condition is sought, then the goods have been changed in such a way that, 1f they have not been made marketable, they have at least been made marketable to the better advantage of both seller and buyer. Ina word, the change in the goods justifies the application of the word treatment to the mode of producing the change. If it be necessary, it should be held that in the context of item 14 chemical change is not of the essence of treatment.

The claim to exemption under item 14 should therefore be upheld."

On this aspect of the appeal, Kaye and Brooking JJ. agreed

In the present case, it is my opinion that the relevant "products of mining" comprise alumina. The Worsley Project was designed and implemented to produce alumina. The Project is in the mining industry. Royalties are paid on the volume of alumina produced. Alumina is taken to Bunbury to

be shipped to other ports. Alumina is the end product.

On this conclusion, it 1s clear that at least the blending process carried out at the Refinery comes within the

This conclusion, however, does not dispose of this issue since the machinery etc. used inthe present case relates to the Conveyor. The Conveyor is used to transport the bauxite from the Mine Site to the Refinery. The Conveyor is in the mining industry but it is said that the transport of the bauxite is not treatment of the products of mining operations. It was pointed out that in Item 14(1) there are no words of expression such as "in or in connexion with" appearing before the words "treatment of the products" of Mining operations. It was contended therefore that in order to come within the second limb of Item 14({1), the machinery

etc. had to be used in the actual treatment of the products.

Consistently with that contention, counsel for the respondent submitted that conveyors used in transporting bauxite at the mine site from the primary crusher to the secondary crusher, from the secondary crusher to the surge pile and from the surge pile along the accelerator belt to the Conveyor, and at the Refinery from the delivery point to the machines used in constructing the stockpiles and from the recovery machinery to the grinding equipment could not constitute machinery etc. used ain the treatment of the products of mining operations. This result did not affect those conveyors since the respondent conceded that those conveyors came within the exemption created by Item 113C. Nevertheless, the issue is the same with respect to all these conveyors, the only difference being a matter of degree

In support of his contentions, counsel for the respondent relied on a number of authorities based upon different legislation where the words "mining operations"

were being considered. They referred to Federal Commissioner

of Taxation v. Broken Hill Proprietary Company Limited (1969)

120 C.L.R. 240, Federal Commissioner of Taxation v. ICI

Australia Ltd. (1972) 127 C.L.R. 529 and Utah Development Co.

v. Federal Commissioner of Taxation (1975) 5 A.L.R. 474 and

on appeal to the High Court, (1976) 9 A.L.R. 660. These

authorities were referred to and relied upon by the Supreme Court of Victoria in Hamersley in holding that the machinery therein in issue was not for use "in carrying out mining

operations". That conclusion did not prevent a finding that

the machinery came within the second limb of Item 14(1).

Commissioner of Taxation (1985) 45 A.T.C. 4316 and on appeal

Federal Commissioner of Taxation v. Northwest Iron Co. Ltd.

(1986) 64 A.L.R. 436, provisions of the Income Tax Assessment

Act 1936 were under consideration with respect to the carrying on of "mining operations on a mining site". One of the installations under consideration was a pipeline some 85 kilometres long extending from the iron ore site at Savage River in Tasmania to Port Latta. The pipeline was used to transport concentrated ore in a slurry form to Port Latta for pelletization before being shipped to other ports. In his judgment, with which Bowen C.J. and Toohey J. agread,

"The taxpayer adopted the method of moving the concentrated ore in a slurry form through the Pipeline to Port Latta for pelletization because it regarded it as the only economically feasible method available. The object of the taxpayer's activities 1s the production of pellets after treatment of the ore, essentially by wet processes and the eventual removal of the water content from the slurry. It is not the object of the taxpayer's operations to produce 'fines'. The slurry, the water content of which is finally removed in the pelletization process, is not a slurry used merely for the purpose of transporting 'fines' otherwise free of water; it is the result of the treatment

process of the ore itself which, prior to transportation, results in ae slurry containing powdered metal. It is true that further water and

some chemical is added for ease of movement through the pipeline; but the mining operations extend until the completion of the pellet producing process. The process of pelletization is integral to the whole operations of the mining venture and essential to the development of the potential of the low-grade ore of the Savage River site by means of the taxpayer's technology. The pipeline is essential to the end product. It ais not different

in essence from a necessary conveyor line conveying material from one section to another within a mining complex. The end product of the taxpayer's Mining activities 1s the production of pellets.

It 15 unreal to draw a line between the operations being conducted at Savage River (up toa point where some adjustment was made to the water content of the slurry and some chemical introduced immediately before the slurry was pumped into the pipeline) and the operations thereafter. Practical and businesslike considerations clearly lead to the

conclusion that the whole of the relevant operations of the taxpayer to the final stage where the pellets emerge are part of its mining

operations. Although at first sight 1t may seem somewhat incongruous that a pipeline, extending for some @5 kilometres from the Savage River to Port Latta, is part of the taxpayer's mining operations, the apparent incongruity disappears when the role of the pipeline is considered in the context of the taxpayer's activities as a whole."

The application of the principles discussed in that passage could lead to the view that in the case before me and having regard to the fact that the end product sought to he recovered from the mining operations under the Worsley Project 15 alumina, the mining operations continue until the alumina has been produced. I do not find it necessary to decide that issue at present but the passage quoted is of assistance in considering the question of whether the Conveycr is used in the treatment of bauxite being the

Machinery etc. for use in the mining industry in the treatment of the products of mining operations is not limited to machinery which 1s used in the direct treatment of the products. Thus the conveyor used to transport the bauxite from the primary crusher at the Mine Site to the

secondary crusher, by analogy with the Northwest Case, is

used in the mining industry un carrying out mining operations. Similarly, the conveyor used at the Refinery to

transport the bauxite from the point at which it is received at the Refinery to the stockpile machinery 1s used in the

Counsel for the respondent rely upon the fact that under the Crown Lease for the Conveyor corridor, the applicants are not permitted to engage in any mining oF manufacturing operations. It must be remembered that' the applicants are not permitted to carry out mining operations on the Refinery lands. These facts donot prevent the applicants being engaged 1n the mining industry both at the Refinery and on the Conveyor. In my opinion, the fact that the Crown Lease of the Conveyor corridor does not permit the applicants to carry out manufacturing operations on that land does not of itself deny that machinery etc. used on that land may be for use in the mining industry in the treatment of

As a basis for their submissions, counsel for the respondent contended that the mining operations at the Mine Site and the manufacturing process at the Refinery were separate and distinct activities and that the Conveyor belonged to neither. Counsel relied strongly on opinions expressed in the B.H.P. Case by Barwick C.J., McTiernan and

"The simplest matter now in dispute between the Commissioner and the taxpayer 15 expenditure and appropriations for expenditure upon the installation of the taxpayer's pelleting plant at Whyalla. We agree with Kitto J. that the expenditure made or provided for by appropriations is not deductible. In our opinion it was not expenditure in connexion with the mining operations carried on by the taxpayer upon its mining property in the Middleback Ranges and it was not upon

development of that mining property. Iron ore mined as, or degraded in the course of transport into, small particles - 'fines' as they are called

• is, at this pellet plant, agglomerated into pellets about half an inch in diameter by a process which includes the addition of water and ventilite and subjected to heat and mechanical treatment. Pellets are more valuable than fines. They can be transported more easily than fines and, unlike fines, they can be used in blast furnaces. It is not necessary to determine a question upon which there was some debate, i.e., whether pellet making is a process of manufacture. It is sufficient to say that upon our understanding of what constitutes Mining operations, pellet making is not such an operation, and, expenditure upon a pellet plant, is not for the purpose of more effectively carrying on the taxpayer's mining operations in the Middleback Ranges. Furthermore, it does not develop the taxpayer's mining property there."

This passage illustrates the difficulties of applying decisions under one Act to questions arising under another Act where different words are used. In the legislation under consideration in the B.H.P. Case, there was no provision similar to the second limb in Item 14(1). Under that Item, a limiting factor is that both limbs apply in the mining industry. The Hamersley Case makes it clear, that in all probability, if Item 14(1) had applied in the 8B.H.P. Case, the activities involved ain the pellet making may well have been the treatment of the products of the mining Operations at the Middleback Ranges. In the present case,

the legislation makes no reference to any particular type of

minang 50 qusstions similar to those discussed in Rk. v. Drake-Brockman; Ex parte National oil Ftv. DBtd. 11345, 68 C.L.R. S51 do ast arise. The Northwest "ase draws attention to the face that if the end product of the mining 15 a4 product 1n a form suitable for shipping, the treatment at a place far from the Mine Site may be mining operations. As has been said already, the end product of the mining operations in this case is alumina, but for present purposes, I am assuming that part of the bauxite blending process is Carried out at the Refinery site and that that process constitutes, in the mining industry, the treatment of the

mere transport of the bauxite on the Conveyor corridor does

Commissioner of Taxation (1963) 118 C.L.R. 177 in which Kitto

J. held that transit mixers on ready mix concrete trucks constituted machinery for manufacture even though they were used for the transportation of goads. They distinguished that authority by arguing that further manufacture took place at the destination where further water was added at the point of delivery. If anything, the authority is against the respondent in that in the present case, on the assumption that the bauxite blending process constitutes "treatment", that process commences before the bauxite 15 first placed on the Conveyor and 15 completed after the bauxite 1s delivered

to the Refinery. It is true that there is no blending

process occurring on the Conveyor but that, in my opinion, 15

not of relevance since the transportation is within the

vy. Commissioner of Taxation 11967) 116 C.L.R. 151 can ke

distinguished because there the taxpayer had limited rights of passage anly over the tctramlines. This authority is discussed later in these reasons. for similar reasons, the

decisions Norton Harvesters Pty. Ltd. v. Federal Commissioner

of Taxation (1974) 74 A.T.C. 4080 and on appeal in the High Court (1974) 48 A.L.J.R. 332 do not assist the respondent on this aspect of the case. All these last mentioned cases involve the concept of manufacture and to have any relevance in the present case, it must be accepted that the exemption to sales tax contained in Item 113C, based as it a5 on manufacture, excludes the operation of Item 14(1) from that part of the Worsley Project that constitutes manufacture at the Refinery. Having regard to the views expressed in the Hamersley Case, I do not accept that proposition and proceed on the basis that the second limb of Item 14(1) applies to the bauxite blending process carriad out at the Refinery

the reasoning applied in the Northwest Case, There, on

mining lease only had been granted. It applied to the mine site, the pipeline corridor and the facilities at the port. In theory, 16 was argued, mining operations could be carried out over the whole of the mining lease. There would be grave practical difficulties in conducting mining operations on the Pipeline corridor, but more importantly, in the present case, the activities of transporting the bauxite on the Conveyor corridor 15 in the mining industry. For that reason, there is much to be said to adopt the approach of the Full Court of the Federal Court and rely upon what was the end product to be recovered in the integrated mining industry project. It is not appropriate to treat bauxite as the intermediate product of mining operations and the alumina as the end product of a manufacturing process separate and distinct from the mining operations. Even on the limited basis on which I am considering this part of the case, the bauxite blending process constitutes "treatment" within the second limb of

Ttem 14(1) and on that basis the transport of the bauxite on the Conveyor 1s to be considered as part of an integrated operation of treating the bauxite. It is clear that the Worsley bauxite, of itself, has no commercial value. It must be processed to obtain alumina before a commercial product is

Counsel for the respondent attempted to answer this conclusion by asserting that the ultimate end product is not alumina but rather aluminium or even the products obtained by the fabrication of aluminium. The facts of any one case determine the limits of the enquiry relevant to determine that case. It is true that the Worsley Agreements contain provisions for the possible establishment of an aluminium smelter but the applicants were under no obligation to establish a smelter. They have not done so. Therefore, there 185 no need to consider whether any smelter, if established, would be in the mining industry. For present

In the result, I conclude that the transportation of the bauxite on the Conveyor forms part of the treatment of the bauxite. That treatment is in the mining industry. It follows therefore that Item 14 applies to exempt the applicants from liability to pay sales tax on the relevant

This conclusion is sufficient to decide these proceedings, but in the circumstances, I should consider the application of Item 113C; cf. the Hamersley Case per Lush J. at p.596. This consideration 1s based on the opinion that each of the exemptions contained in Item 14 and Item 113C can apply to the one set of facts, in other words, they are not

For the purposes of Item 113C, the relevant goods comprise the same machinery, implements and apparatus used on the Conveyor as those referred toa when considering the application of Item 14. Tt must be remembered that some of that machinery etc. is on the Mine Site land and some, including the machinery etc. used to drive the Flight 2 conveyor belt, is on the Refinery land while the balance is on the Conveyor corridor land. These goods were applied by Worsley Alumina, a registered person under Item 113C, to its own use. The issue is whether the use of these goods was "as aids to manufacture." Reference 15 made to the definition of "aids to manufacture" set out earlier in these reasons. The issue is whether the relevant goods were used by Worsley

"in the course of carrying on a business (where that use is eaxclusively, or primarily and principally, for the purposes of that business), being -

(a) machinery, implements and apparatus for use exclusively, or primarily and principally -

(viii) in the transportation, within premises un which any activity is carried out by him as specified in this paragraph ... of goods in relation to which that activity has been, is, or is to ha, carried out by him; ... ."

It should be noted that the word "goods" appearing in sub-paragraph (viii) has a different meaning to the word "goods" appearing in the opening paragraph of the definition of "aids to manufacture." In the present case, the relevant

"goods" for the purpose of sub-paragraph (viii) comprise the

bauxite being transported on the conveyor belts being part of the Conveyor. Earlier in these reasons sub-paragraphs (i), (12), (i212) and (ix) are set out as being the relevant provisions for the purpose of sub-paragraph (viii) but of these, the most relevant sub-paragraph is (i). Thus the issue 1s whether the relevant machinery etc. used for the

transporting of the bauxite from the Mine Site to the

"(1) in the actual processing or treatment of goods to be used in, wrought into or attached to goods to be manufactured;."

In the present case, the goods first referred to in sub-paragraph (i) comprise the bauxite carried on the Conveyor while the goods secondly referred to comprise alumina. In the present case, an 1ssue arises as to whether that bauxite constitutes "goods to be so used or dealt with that those goods (bauxite), or some essential element thereof {alumina tri-hydrate), will form an integral part of the goods to be manufactured (alumina);" :- see the definition of "goods to be used in, wrought into or attached to goods to be

In the present case, the respondent admits that Worsley Alumina has the exclusive possession of the Joint Venture assets for the purpose of managing the business of

the four members of the Joint Venture. The respondent admits

that the business being carried on 1s "the business of mining bauxite and refining the same into alumina in the Darling Ranges in Western Australia." The facts found by me show that that admission was correct. The importance flowing from this is that there is one business only being conducted by Worsley Alumina, namely the business of mining bauxite and

From what appears earlier in these reasons, the evidence shows that the blending process for the bauxite commences at the Mine Site. The bauxite, as so partially blended, is then transported on the Conveyor to the Refinery where the blending process is completed. Thereafter there are a number of different processes undertaken whereby the alumina is produced. Counsel for the applicants contended that each of these processes, namely the blending, the digestion, the separation, the precipitation and the calcination constitutes actual processing or treatment of goods within sub-paragraph (i), and that the transportation of the bauxite from the Mine Site to the Refinery on the Conveyor is transportation "within premises" in which that actual processing or treatment is carried out. For this purpose they contended that the interest of the applicants in the land the subject of the Crown Leases and the Mining Lease and the land owned in fee simple by the applicants constitutes the one "premises" within the meaning of

respondent can be given by a series of propositions: -

1. The Conveyor corridor 15 not to be regarded in any relevant sense as premises since 16 is not

(Db) such premises cannot properly be regarded as part of the premises occupied by either or both of the Mine Site or the

To come within Item 113C "aids to manufacture" regulation 4(a)(viil), a relevant manufacturing activity must be conducted within the premises where the transportation

(b) the Mine Site is of a different tenure and no such relevant "processing or treatment" occurs there; and no processing or treatment occurs at any

It is wrong to approach the characterisation of the operations being conducted at the various stages of the project from the point

characterisation process and 15 inconsistent with the authorities. Further, such an approach tends to

finesse or evade the proper analysis of the activity being performed and overlooks the differences in the activities being undertaken at different stages of the process, the effect which they have on the bauxite and the nature

In the Hamersley Case, in the Full Court, Lush and Kaye JJ. held that Item 113C applied to grant exemption to sales tax with respect to parts of machinery used at the port in the blending process of the iron ore. They held that the blending was "treatment" and that the machinery parts were for machines for use in the "processing or treatment" of the ore within the definition in the regulations of "aids to Manufacture," sub-paragraph (i); see pp.607-8. It is

interesting to see what was said by Lush J. at p.603:-

"For the Commissioner it was contended that the contribution of the stacker and reclaimers to the uniform intermingling of the mixed ore was insignificant; that the desired result was really achieved in the selection of ores to be delivered to the crushers and was virtually complete when the Mine stacker stockpiled the ore from the mine screenhouse. The functions of the subsequent reclaiming and stacking processes were properly to be classified as handling, transportation and storage.

The exercise of classification in this way 15 yelevant to questions arising in relation to item

113C, but not to item 14. Each of the three machines played a part in handling, transportation and storage operations, But the evidence establishes that the Paraburdoo (mine site)

reclaimer completed a blending or intermingling phase the foundation for which had been laid by the operations of the mine stacker, that the Parker Point (port) stacker intermingled on the stockpiles Mount Tom Price (mine site) and Paraburdoo ore, and in the case of fines, return fines from the Parker Point screenhouse, and that the Parker Point reclaimer completed the intermingling of fines the foundation for which had been laid by the stacker. Tt also establishes that these results of the various operations were intended and desired, and

that the contribution of each to the end result was significant."

By parity of reasoning, in the present case the blending of the bauxite at the Refinery completes the blending process commenced at the Mine Site and constitutes the processing or treatment of bauxite. Of necessity, if the end product is to be treated as alumina, the processing or treatment of goods continues at the subsequent stages of the Refinery process and the details of the chemical process that

respect to the transportation within premises of the iron ore from the mine sites to the port. A related question, arising under different legislation, was considered in the Northwest Case. It will be recalled that in that case, the one mining lease was with respect to the mine site, the port area and the long narrow strip of land connecting the two and upon which the pipeline was constructed. The reports do not show

whether that narrow strip was fenced or not but it would he

SUrprising to see fencing along the rough and remote areas through which the pipeline passed. The Full Court held that the pipeline was wholly within the mining property. The Court had to consider whether complex provisions of Income Tax Legislation operated to prevent the taxpayer from claiming deductions with respect to the cost of constructing the pipeline. Part of the legislation referred to "transportation within premises." At p.449 of 64 A.L.R. 436, Lockhart J., with whose judgment the other members of the

Full Court agreed, after referring to the legislation, said:-

"I do not find it necessary to decide this question Because in my opinion the pipeline is not used by the taxpayer primarily, principally and directly, or indeed at all, in the concentration of a metal or in the treatment or processing of a metal after its concentration. The pipeline is part of the taxpayer's mining operation; but its role is to convey slurry containing magnetic particles from the Savage River site to Lhe Port Latta facilities and that is all it does. It is a misconception to regard the pipeline as being for use either in the processes of separating the metal from its ore or in the treatment or processing of metal after its separation. Hence, s.62AA(4) does not apply to the pipeline.

In my opinion 5.62AA(2) does apply with respect to the pipeline. It is for use primarily, principally and directly in the transportation of 'goods', namely, the slurry containing metallic particles which are, I think, liquids or substances within the statutory definition of 'goods' stated in s.62AA(1). The pipeline, notwithstanding its length of some 85 kilometres, is within the 'premises' on which the taxpayer conducts its Mining operations."

On the findings made in the present case, it appears that Item 113C applies to exempt the applicants from liability to pay tax on the relevant machinery etc. Accordingly, it is necessary to see whether legal authority

constrains the Court to come to the contrary conclusion.

The essential feature of the contentions made on behalf of the respondent is that each process must be treated separately. Thus, it was contended that the mining Operations ceased at the Mine Site and the treatment of the products of the mining operations commenced at the earliest at the Refinery. That contention has been rejected. It was contended further that the manufacturing process commenced at the earliest when the raw product is treated or processed ta produce something new. It was said that in this case, that commenced when the blended bauxite was fed into the grinder and met the caustic soda stream. As a secondary argument, 1t was contended that in any event, the manufacturing process could not commence before the blending process commenced at the Refinery. In either event, the Conveyor corridor, it was said, constituted a type of "no-mans land", and could not constitute premises on which the activity of the actual

For reasons given earlier, these contentions are rejected. In my opinion, the manufacturing process began at the Mine Site wilh the partial blending of the bauxite and was completed at the Refinery with the production of the alumina. That was the very basis on which the Joint Venture was founded. That was the basis of the Worsley Agreements and the Worsley legislation. The Crown Leases and the Mining Lease were granted to give effect to the Worsley Agreements and the Worsley Ilagislation. Special conditions were contained in the various leases todo that. The normal provisions applicable in Crown Leases under the Lands Act and Mining Leases under the Mining Act, did not apply. There was but one project, one business, one premises, but the latter

On the question of when manufacture commences, counsel for the respondent relied upon a number of authorities in which other legislation was being considered. Most of those authorities are not of real assistance in the present case. The particular facts of this case are very different from the facts of those cases. The legislation was

different. Thus Norton Harvesters Pty. Ltd. v. Federal

Commissioner of Taxation (1974) 74 A.T.C. 4080 and on appeal (1974) 48 A.L.J.R. 332 depends upon its own facts and the Income Tax Legislation. Likewise with respect to Utah

Development Co. v. Federal Commissioner of Taxation (1975) 5

A.L.R. 474 and on appeal (1976) 50 A.L.0.R. 678, and the

Moreton Central Sugar Mill Case. The Ready Mixed Concrete

Counsel for the respondent attempted to distinguish

the principles applied in the Northwest Case. He referred to

the fact that there was one Mining Lease only in that case and that there was no intermediate product. On this latter point, 1t must be remembered that the Worsley bauxite has no commercial value in itself. Its only value is in its use in the production of alumina at the Worsley Refinery. As in the

slurry being transported in the Northwest Case, the goods

have no commercial value until the processing or treatment is completed after arrival at the port. No manufacturing or processing occurred in the pipeline. In the present case, I am of the opinion that the bauxite does not constitute an intermediate product, and the cases which are earlier

Co-op and Co. Ltd. v. Federal Commissioner of Taxation (1949)

77 C.L.R. 299 to support their contention that manufacture in the present case, for the purposes of sub-paragraphs (i), (ii) and (111), commenced at the stage when at the earliest the soda stream is added to the ground bauxite and that the premises on which transportation occurred, to come within sub-paragraph (viii) had to be on the same premises. Similar

principles are enunciated in the Moreton Central Sugar Mill

Case. This proposition was not disputed by counsel for the applicants. This issue must be determined on the facts of

In my opinion, the fact that the Conveyor corridor is not completely fenced 1s immaterial. Where the corridor does cross roads, entry to the corridor 15 restricted by locked gates and fences. As in the Northwest Case, it would not be practical to fence the whole of the corridor as i1t extends along the rough and remote areas between the Mine Site and the Refinery. Further, environmental requirements insisted that native fauna be permitted to pass through the corridor. The leases contain the traditional words "demise and lease." They are for different tenures but all designed to enable the applicants to carry out the Worsley Project. The interests the applicants have in the land is more than a mere licence. They have the right to exclusive possession and have exercised that right. The whole of the Mine Site land, the Refinery land and the Conveyor corridor land constitute premises and the one premises to enable the applicants to carry on the one business of mining bauxite and

In the result, the relevant machinery etc. used by Worsley Alumina in the Conveyor were goods applied by it to its own use as aids to manufacture. In coming to this conclusion, I am satisfied that the relevant machinery 1s being used in the transportation within premises within the Meaning of paragraph (a)(vi1i) of the definition of "aids to

manufacture" contained in Reg.4 of the Sales Tax Regulations.

Accordingly, a declaration will be made in the form

f certuty that dhs and the GO (Erb
! pieceding pages are a true copy of the ~ | Reasons for Judgment herein of the Honourable Mr. Jugtice Noerthrop rep A

Title of Action : REYNOLDS AUSTRALIA ALUMINA LTD., THE SHELL COMPANY OF AUSTRALIA LIMITED, B.H.P. MINERALS LID., KOBE ALUMINA ASSOCIATES (AUSTRALIA) PTY. LIMITED and WORSLEY ALUMINA PITY. LTD. v. THE COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALTA

Solicitors for Respondent Australian Government Solicitor,