Robe River Mining Co Pty Ltd v Commissioner of Taxation

Federal Court of Australia|1996-06-12|Before: Carr JJ

THE COURT: In 1982 the Customs Act 1901 (Cth) ("the Customs Act") was amended by the insertion of s164, providing to a limited class of persons a rebate of customs duty payable on diesel fuel. At the same time s78A was introduced into the Excise Act 1901 ("the Excise Act") to grant a rebate of excise duty on diesel fuel in similar circumstances. Relevantly, the two rebates were granted to persons who purchased diesel fuel for use by that person in "mining operations". The expression "mining operations" in the Excise Act was to have the same meaning as it did in s164 of the Customs Act, where it was defined as meaning:

"(a)exploration, prospecting or mining for minerals; or (b) the dressing or beneficiation (at the mining site or elsewhere) of minerals, or ores bearing minerals, as an integral part of operations for their recovery; and includes: (c) other operations connected with exploration, prospecting or mining for minerals that are carried out in, or at a place adjacent to, the area in which the exploration, prospecting or mining occurs; (ca)other operations connected with the dressing or beneficiation of minerals, or ores bearing minerals, where that dressing or beneficiation is an integral part of the operation for the recovery of the minerals or of the ores, being operations that are carried out in, or at a place adjacent to, the area in which the dressing or beneficiation occurs; ... (g) the production of common salt by means of evaporation." The rebates so granted replaced the system which had previously prevailed, of certificates which permitted purchase of diesel oil for off-road use at duty free prices. The rebates operated, and it can be supposed were intended to operate, as a concession to the various industries which were named in s164, including relevantly the mining industry. Importantly, they operated to reduce the cost of diesel fuel as a significant business input in the relevant industries, with a consequent impact on the price to consumers and the costs of exports. This legislative scheme continued until the Customs and Excise Legislation Amendment Act 1995 ("the Amending Act") came into force on 1 July 1995. That Act amended the definition of "mining operations" retrospectively. Paragraphs (c) and (ca) of the definition were deleted as and from 1 August 1986 and other amendments were made to the definition to operate from 1 July 1995. In what may be seen to be an interference with the judicial process, s5(4) of the Amending Act was specifically directed to this Court. It requires the Court, in determining a rebate application which commenced in the Court before 1 July 1995, and had not on that day been determined, to apply the law as amended by the 1995 Amending Act. There was no challenge to the validity of the 1995 legislation so providing. The definition of "mining operations" in force after 1 July 1995 is, so far as is relevant, in the following terms: "`mining operations' means: (a) exploration, prospecting the removal of overburden and other activities undertaken in the preparation of a site to enable mining to commence or mining for minerals; or (b) the dressing or beneficiation of minerals, or ores bearing minerals, as an integral part of operations for their recovery; and includes: (c) if minerals, or ores bearing minerals, are dressed or beneficiated at a place other than the mining site as an integral part of operations for their recovery; (i) the transporting of the minerals or ores from the mining site to that place; and (ii)the return journey from that place to the mining site of the vehicles or equipment used in transporting the minerals or ores, if that journey is for the purpose of later carrying out the mining operation referred to in subparagraph (i) or for the backloading of raw materials or consumables for use in a mining operation referred to in paragraph (a) or (b); ...". Dampier Salt (Operations) Pty Ltd ("Dampier"), the applicant, sought a rebate of the duty paid by it under the Excise Act in respect of diesel fuel purchased by it for use in its salt production operations at Dampier and Lake MacLeod in Western Australia. Its application was rejected in part and it accordingly applied to the Administrative Appeals Tribunal for a review of that decision. By majority, the Tribunal found in favour of the Director of Customs who administers the diesel rebate scheme. Dampier accordingly appealed from that decision to a single judge of this Court and was successful in the appeal. The Director of Customs now appeals to a Full Court of this Court.

THE OPERATIONS AT DAMPIER AND LAKE MACLEOD Although the method of salt production at both Dampier and Lake MacLeod may be described as the production of "solar salt", there are differences between the two operations. At Dampier the salt is produced by concentration of sea water pumped from the Indian Ocean through a series of pre-concentration ponds before being pumped into crystallisers where the salt is deposited. Lake MacLeod, by contrast, is a coastal lake separated from the Indian Ocean by some fifteen kilometres of coastal dunes and outcrops of rock. The lake consists of a layer of gypsite overlaying a large body of halite (mineral salt - sodium chloride). A subsurface brine aquifer rich in sodium chloride exists in both the halite and gypsite layers. To recover brine, a collection ditch has been cut into the halite layer. The brine is pumped from that collection ditch into a transport channel of 8 kilometres length to a chemical treatment point where chemicals are added to the brine before the brine is pumped into the crystallisers. The addition of the chemicals is essential to reduce such impurities as calcium and manganese. The operations at Dampier are conducted under an agreement between Dampier and the Government of Western Australia, known as The Dampier Solar Salt Industry Agreement. The activities at Lake MacLeod are likewise conducted under an agreement between the company and the Government of Western Australia. This agreement is known as The Evaporites (Lake MacLeod) Agreement. All relevant operations are carried on on land the subject of mining leases from the Western Australian government. In each case the salt in the crystalliser is harvested at regular intervals and transported to a stockpile on the production site referred to as the "wet stockpile" where it drains for about three months. The salt has previously been fed into a washing plant to remove some impurities. The salt is spread out on the wet stockpile in layers. There is a continuous analysis made of the chemical quality of the layers. A bulldozer and a loader work the pile so as to break up the crust which forms on the surface and blend the salt to achieve a more homogeneous product. While the salt is on the wet stockpile there is a process of draining and evaporation which removes impurities and alters the calcium and magnesium balance. The Tribunal found that the operations at the wet stockpile had the following purposes: "a) spreading the salt laterally for blending purposes; b) caving-in the pile to promote vertical blending of the layers of salt;

c) breaking up the crust to promote evaporation; d) loading the salt onto road trains for transportation to the port facility; e) reducing the water content; and f) reducing the level of impurities." Salt is then removed from different parts of the wet stock pile and driven to the port site where it is dumped through grizzly bars onto a conveyor belt which elevates it onto what is referred to as the "dry stockpile". A chemical analysis is performed and if the salt as dumped on the dry stock pile does not meet the company's required specification, salt from a different location in the wet stockpile is fed onto the dry stockpile. The operations on the dry stockpile are described in a statement of facts accepted by the Tribunal in the following terms: "... The salt is discharged from the stacker unit and falls a distance of between 3 metres and 25 metres. The action of the salt passing through the warm air results in a further reduction in the moisture content of the salt. The dry salt stockpile allows salt from the wet salt stockpile to be blended together to provide an acceptable grade which allows DSO (ie Dampier) to provide a consistent product to its customers. This is achieved by selectively reclaiming salt from the wet salt stockpile on the basis of quality and composition, and blending these varying qualities onto the dry stockpile. The salt being fed to the dry salt stockpile is sampled to maintain control of this blending process. The various grades of salt are selectively fed to the dry stockpile so that the action of stockpiling, spreading and reclaiming produce an homogeneous end product for shipment. The dry salt stockpile is maintained at a size to permit this process to be achieved for expected shipping levels. The continuous sampling of salt during shiploading is undertaken to confirm that each shipment meets contract specifications and typical product analysis ... The processes of reclaiming from the dry salt stockpile and ship loading ensure that the salt is loaded into the vessel in a free flowing state... Another process takes place as the salt moves along the conveyor belt. A powerful electromagnet is suspended over the belt, and as the salt falls onto another conveyor belt metallic impurities are drawn to and held by the magnet. The electromagnet separates the salt from pieces of iron, bolts, brackets, rods, hand tools etc which may have been introduced during the whole of the process from crystalliser salt crystal growth through to the dry salt stockpile ... While the salt is on the dry salt stockpile it is being subjected to a continued drying and drainage process. During all the processes undertaken at the port site a further physical and chemical change in the salt occurs. On the wet salt stockpile a crust forms on the outside of the pile, trapping saturated moisture vapours within the stockpile. The dry salt processes allow the trapped vapours to escape and an additional drying of the salt occurs. This results in a further enhancement of the total quality of the salt and the total recoverable amount. Whenever the moisture content in the salt is decreased, the proportion of sodium chloride (salt) in the final product is increased. Therefore, whilst the process of moisture reduction is carried out, there is a continuation of the production process." During loading, chemical additives may be used to give the salt anti-caking properties if required by a particular purchaser, or potassium iodate may be added for salt required for human consumption. The Director of Customs allowed Dampier a diesel fuel rebate for the fuel consumed in operations up to and including the loading of the salt from the wet stockpile onto road trains for transport to the dry stockpile. Dampier claims that its entitlement extends to its operations to transport the salt to the dry stockpile and to its operations on the dry stockpile. Three further matters of fact should be noted. First, the parties are in agreement that salt is a mineral and that common salt is a generic term used to differentiate sodium chloride from other salts, for example, magnesium sulphate. Second, Dampier sells the salt it produces at Dampier and Lake MacLeod in the bulk seaborne traded salt market. Within this market the chlor-alkali producers are the main customers. These customers set the quality standards for suppliers into the seaborne traded salt market, which is a highly competitive market. Although Dampier does not sell into it there is a potential market for salt for use in swimming pools. Australia-wide this market is estimated to be 30,000 tonnes per annum. By comparison, total production of salt by all producers in Western Australia is approximately 7,500,000 tonnes per annum. Dampier produces approximately 4,000,000 tonnes per annum, 2,500,000 tonnes from Dampier and 1,500,000 tonnes from Lake MacLeod. In 1993 Dampier sold approximately 700 tonnes of salt for general purpose use in Western Australia. It may thus be concluded that effectively the salt produced by Dampier is saleable only as bulk seaborne trade salt and in accordance with the specifications required by purchasers in that market. There are certain "typical" ranges of impurity with sodium chloride operative in the world bulk seaborne traded salt market. Production of salt within these "typical" ranges is expected by all customers in that market. These "typical" ranges are, at least inferentially, higher than would operate for salt sold into the swimming pool market, for example. Individual contract specifications for salt ordered by customers of Dampier in the world bulk seaborne trade salt market may differ from the "typical" ranges. In addition to moisture, the typical ranges of impurities allow for between 0.17 percent to 0.30 percent impurities present. Apart from water, impurities include, calcium, magnesium, sulphate, potassium and insolubles. THE PROCEEDINGS IN THE TRIBUNAL By majority, the Tribunal affirmed the decision of the Director of Customs to deny the rebate to Dampier for transport to and operations at the dry stockpile. Indeed, the Tribunal went further and found that the entitlement to rebate ceased as soon as the salt found its way to the wet stockpile. In reaching its decision the Tribunal was influenced by an earlier decision of the Tribunal in Leslie Salt v Collector of Customs (Unreported, Decision No 8697, 28 April 1993). In that decision it was held that paras(b), (c) and (ca) of the definition of "mining operations", as then in force, had no application to salt evaporation and that para(g) stood alone. However, it is perhaps fair to say that of even greater significance to the Tribunal was the view it took as to the point of time when mining operations were complete. Its approach and ultimate conclusion are illustrated in the following passage from the reasons of the majority: "From a common sense and from a scientific point of view (which is supported by the evidence of Dr Avraamides), common salt (sodium chloride) is produced at Dampier and Lake MacLeod when the product is harvested from the crystallisers and washed. The product on the wet stockpile is already common salt and any further processing or refining by way of drainage, evaporation and working over the pile with machinery is part of the process of preparing the common salt for sale to the applicant's customers in its chosen market in accordance with the contract specification and typical specifications." Hence the Tribunal drew a distinction between the mining of salt, which, in its view, concluded when the salt pumped from the ocean or lake as the case may be, was dumped on the wet stockpile, and the operations thereafter which were, in the Tribunal's view, part of the operations involved in the "preparation for sale" or "marketing" of the salt. THE PROCEEDINGS IN THIS COURT Dampier appealed to this Court from the decision of the Tribunal. That "appeal" is a proceeding in the original jurisdiction of this Court and is an appeal on, that is to say limited to, a question of law. Having regard to the 1995 Amending Act, the learned primary judge was of the view that the identification of the question of law on the part of the Tribunal, the precondition to jurisdiction of the Court, fell to be determined in accordance with the law in force prior to the 1995 Amending Act. It then became necessary for his Honour to determine whether, in accordance with the pre-1995 law, the Tribunal had been in error. Having determined that the Tribunal had erred in law, it then became his Honour's task to consider for himself the availability of the rebate under the 1995 legislation as a matter of law by reference to the facts as found by the Tribunal. There was no challenge before us to this approach, nor was there any dispute between the parties as to whether the Court had jurisdiction to hear the appeal. A question of law clearly arose which may be defined either as being the proper interpretation of the expression "mining operations" in the relevant legislation, or as being whether, the facts not being in dispute, the case was one which fell within or without the rebate provisions. The learned judge at first instance was of the view that it was unnecessary to determine whether the operations of Dampier could be considered to be mining in the ordinary sense of that word, because the specific mention of the production of common salt by evaporation was wide enough to encompass not merely the activities to the point of time where salt was dumped upon the wet stockpile, but also: "... diesel fuel purchased for use in any part of an operation undertaken to recover a mineral as a saleable product..." His Honour said: "The evidence presented to and accepted by the Tribunal shows that up to the point where the salt product is loaded on vessels for export there is an integrated set of steps required to be carried out before the marketable product for export becomes available to be loaded. That product finally becomes available by careful manipulation of the dry stockpile. All steps up to that point are progressive and an integral part of the mining operation the object of which is to recover the product to meet the requirements of the purchasers under the export contracts."

The reference in this passage to an "integrated set of steps" appears first in his Honour's decision in Robe River Mining Co Pty Ltd v Commissioner of Taxation (1990) 90 ATC 5028 at 5038, a sales tax case. The phrase has been thereafter repeated, for example in Collector of Customs v The Western Australian Government Railways Commission (Westrail) (1995) 39 ALD 21, given on the same date as the decision of the present case at first instance. THE CORRECT APPROACH TO THE INTERPRETATION OF "MINING OPERATIONS" Ever since the decision of the full High Court in Federal Commissioner of Taxation v ICI Australia Limited (1971) 127 CLR 529, it has been clear that the recovery of salt by the pumping of brine from an underground source and evaporation of that brine so as to produce salt is capable of being described as "mining" in a statute concerned with mining operations, such as the Income Tax Assessment Act 1936 (Cth). However, Barwick CJ, with whom McTiernan J agreed, said in that case (at 565): "... if the evaporation was of sea water or of salt water obtained otherwise than from below the surface of the earth, the evaporative process would not itself be a mining operation any more than the pumping of the water from the sea or from a lake would be a mining operation. But though the evaporative process is similar in each case the facts that the brine is the immediate product, as I think, of a mining operation and that the recovery of the mineral raised by the mining operation is not complete until the evaporative process has taken place lead me to conclude that that evaporative process is itself so associated with the raising of the brine and the recovery of the metal, sodium chloride, as to be part of the mining operation." Gibbs J (at 583) spoke of the evaporative process as involving the separation of: "... that which it was sought to obtain by mining, namely, salt, from that which was mined with it, namely water and the calcium and magnesium salts. The object of ICI's operation was, I consider, to obtain salt, not to obtain brine. I agree, therefore, with the view... that all the operations up to crystallisation formed part of the mining operations." It may be supposed that the doubt, suggested in the judgment of Barwick CJ quoted above, led the Parliament to refer in the definition of "mining operations" particularly to the production of salt by the process of evaporation, to avoid any argument as to whether such a process, particularly where the process commenced with the pumping of sea water rather than from an underground source, was properly to be described as "mining for minerals". This doubt notwithstanding, it would seem today that the obtaining of salt from the ocean or a lake and the subsequent process of drying and purifying would be included in the ordinary meaning of `mining for minerals' and, in this context, the ambit of state mining legislation which includes salt production, would have relevance. However, it is not necessary to decide this matter, for there is no reason to suspect that the concept of "production of common salt" is any narrower than would be the concept of "mining for minerals (being common salt)". Nor is there any reason to suspect that the legislature intended the concession available to miners for other minerals to be wider than the concession available to salt producers. In State Rail Authority (NSW) v Collector of Customs (1991) 33 FCR 211 at 215, a Full Court of this Court (Beaumont, Burchett and Foster JJ) pointed out that the definition of "mining operations" in the present context had as its central reference point the recovery of minerals. Hence, in the context of salt production, the reference point is the recovery of salt. But so to express the problem is to expose an ambiguity which reaches to the heart of the issue between the parties. It is clear that a point must be reached where the process of recovery of the mineral (the mining operation) will have come to an end and some other process, be that called treatment or preparation for marketing or preparation for sale, will have commenced. The difficulty is to define when that point occurs. There are three potential approaches which can be adopted. The first approach is that mining operations (ie in the present case, salt production) will cease when there has been produced something which is recognisable as the mineral, here common salt, even if there be no market for the substance produced in that form and irrespective of the market in which the claimant for a rebate operates. The second is that the mining operations will come to an end as soon as there has been produced something (being a mineral) for which there is a market (ie in the present case, salt) irrespective of whether the person claiming the rebate operates in that market. The third approach is that the mining operation will only cease when there has been produced by the claimant to the rebate minerals (ie in the present case, salt) which it can market in the market in which it operates. The first of these alternatives is that adopted by the Tribunal and argued for by the Director before us. The proper approach was said to be that mining operations would cease at a time coextensive with the point of time when the relevant mineral has been recovered from the ground, irrespective of whether the mineral, in the form in which it is so recovered, is saleable at all. With respect, that view is inconsistent with the approach adopted by this Court in cases decided upon the present legislation as well as with cases in the income tax field where somewhat similar language is adopted. The fact that the context of the latter cases was income tax does not, contrary to the submissions of the Director, provide a relevant ground of distinction.

In Collector of Customs v BHP Australia Coal Limited (1994) 53 FCR 499, operations designed to de-water and "homogenise" coal were found to be "integral to the recovery of the coal" so that fuel used in them was rebateable. At 510 the Full Court said: "The very processes of extraction and refinement which, in the case of a metal, produce a pure product, in the case of coal, fragment the mineral into particles of different size and grade which require that they be later mixed in an appropriate way to produce a satisfactory end product. The evidence indicates that this is so, even if the end product so produced does not meet the particular specifications of a customer. The more so, of course, if the object of the whole process is to meet such a specification. It would seem, therefore, that in the case of coal the separation process is not complete until the segregated particles are dewatered and remixed into an homogenised whole. It is at that point that the coal can be regarded as "recovered". It is not until this process is complete that a useable end product is achieved. And this is so, even if, thereafter, additional operations are required to meet a specific customer's requirements." It must be accepted that the case was concerned not specifically with the words "mining for minerals" but with the provisions of para (ca) concerned with beneficiation of minerals. However, that paragraph limits the beneficiation of which it speaks to beneficiation which is an "integral part of the operations ... for the recovery of the minerals", and there can be little doubt that the mining operations extend to the recovery of the relevant mineral to be mined. More importantly, however, the case suggests that a practical commercial approach should be adopted to the interpretation of the legislation so that the mining operation should not be taken to conclude until at the very least there came into existence a mineral which was commercially saleable. The view that the process of recovery of a mineral continued at least until a saleable product emerged had been earlier accepted by another Full Court of this Court in Abbott Point Bulk Coal Pty Ltd v Collector of Customs (1992) 35 FCR 371. That case likewise concerned coal and the proper interpretation of para (ca) of the definition. In that case it had been found as a fact by the Tribunal that low grade coal was a saleable product. The applicant for rebate in fact mixed lower grade with higher grade coal to maximise the return to it in the market in which it operated. After indicating that a question of fact was involved and recognising that a commonsense and commercial approach should be taken to that question, Ryan and Cooper JJ said (at 379): "The process of recovery includes, in our view, those steps which are taken by a miner before sale, by whatever process, to remove the mineral from that in which it is embedded or with which it is intermixed. Such a process comprehends the refining of minerals or ore to remove impurities naturally occurring in the material as it has been mined. Once the process of separation or refining has been completed, to subject the mineral product to a process or procedure designed purely to facilitate its better use as so separated or refined or to render it more readily or advantageously marketable is not in our view part of the recovery process." In that case mere mixing after the impurities in the coal had been removed went beyond the recovery process and so fell outside the definition of "mining operations". French J said (at 389): "There is nothing in the concept of recovery which requires the conclusion that it ceases when a vendible product is produced. The mere excavation and stockpiling of a mineral may yield a vendible product. Even reject material in tailings dumps can attract buyers. Whether a product is vendible depends upon whether somebody is prepared to pay for it. While some concept of utility or commercial value may be inherent in the idea of recovery, there is no warrant for the conclusion that it is a process which ceases upon first production of a saleable product. Such a restrictive construction of the term recovery' is, in my opinion, not mandated by the language of the subsection and seems antithetical to the legislative policy. In making the finding it did on this point the Tribunal, in my opinion, erred on a question of law. But, in the event, the error was irrelevant to the outcome of the case. For whatever effect is given to the word recovery' it does involve the notion of separation of material and was a process which, on the Tribunal's finding of fact had ceased by the time the coal was delivered to Abbott Point."

These cases stand as authority for the proposition that the process of recovery of a mineral will not necessarily be complete at the first time the mineral can be identified as having been separated from that in which it was embedded. Rather, there must at the least be found a saleable product, but there too, the mere emergence of a saleable product from the extractive process will not mean that the process of recovery of a mineral has been complete, especially where the saleable product is not that which is the intended outcome of the mining operation. These cases accord with those decided under the Income Tax Assessment Act 1936 (Cth). Under that Act certain deductions of a capital nature are available to a tax payer who carries on "mining operations ... for the extraction of minerals ... from their natural site". These words are given no defined meaning save that the context differentiates "mining operations" from "treatment" as defined. The first income tax case to which reference may be made is Commissioner of Taxation v Broken Hill Proprietary Company Ltd (1969) 120 CLR 240. In that case the taxpayer worked ironstone deposits from which it extracted, inter alia, iron files not suitable as such for use as feed for blast furnaces. Although it would appear that there was a market for files, the market was better for pellets. Accordingly, the files were transported to a pellet plant away from the mining site where they were transformed into pellets. In the circumstances it was held that the mining operation concluded before the files were transported to the pellet plant. In discussing the meaning of the expression "mining operations", Kitto J said (at 244-5): "This expression ... embraces not only the extraction of mineral from the soil, but also all operations pertaining to mining: Parker v Federal Commissioner of Taxation (1953) 90 CLR 489 at p494. Thus it comprehends more than mining in the narrow sense which imports the detaching of lumps of material from the position in which in a state of nature they form part of the soil. It extends to any work done on a mineral-bearing property in preparation for or as ancillary to the actual winning of the mineral (as distinguished from work for the purpose of ascertaining whether it is worthwhile to undertake mining at all) ... Likewise it extends to any work done on the property subsequently to the winning of the mineral (eg transporting, crushing, sluicing and screening) for the purpose of completing the recovery of the desired end product of the whole activity: Federal Commissioner of Taxation v Henderson (1943) 68 CLR 29 at pp45, 50. In each case it is the close association of the work with the mining proper that gives it the character of operations pertaining to mining. Accordingly, such subsequent procedures as above mentioned, if carried out at a distance from the mining property, may be in particular cases so dissociated from the mining that they are properly to be considered as standing on their own feet (so to speak) and to be characterised not by reference to the mining but by reference only to the result which they themselves achieve."

The reference in this passage to "association" may well be the origin of the concept of "integration" adopted by Lee J. Be that as it may, the judgment of Kitto J makes clear that in the circumstances of that case the pelletising operation was dissociated from the actual mining operations so that the pelletising plant could be characterised (at 253) as: "... enhancing the utility, and therefore the value, of certain of the final products of the mining properties after they had left those properties with the quality of saleable commodities already fastened upon them by the existence of the means of access to commerce." On appeal, the Full Court did not endorse everything that was said by Kitto J. Barwick CJ, McTiernan and Menzies JJ, commenting upon the passage first cited, said (at 272-3): "We agree entirely with his Honour's view that mining operations' covers work done on a mineral-bearing property in preparation for, or as ancillary to, the actual winning of the mineral,' but, with regard to the statement, that it extends to any work done on the property subsequently to the winning of the mineral (eg transporting, crushing, sluicing and screening) for the purpose of completing the recovery of the desired end product of the whole activity', we have a reservation. We do not doubt that to separate what it is sought to obtain by mining from that which is mined with it ... is part of a mining operation' but we would not extend the conception to what is merely the treatment of the mineral recovered for the purpose of the better utilization of that mineral. Thus to crush bluestone in a stone crushing plant so that it can be used for road making, or to fashion sandstone so that it becomes suitable for building a wall or a town hall is not, as we see it, a mining operation. Nor would the cutting of diamonds or opals which have been recovered by mining operations fall within the description of mining operations." The need for a dichotomy between mining and treatment clearly emerges from the context of the Income Tax Assessment Act. Nevertheless, it must be accepted that there is a point of time when what is done is subsequent to the mining operation and constitutes an operation directed at the better utilisation of the mineral recovered. What is important for present purposes is the recognition given by their Honours to the need to consider the desired end product of the particular taxpayer's operation. The second case, to which reference has already been made, is the ICI case. In that case the Commissioner of Taxation argued that the mining operation (also salt production) concluded with the production of brine. That argument was rejected by the majority of Justices of the High Court who sat on the case. At first instance, Walsh J referred to the fact that the salt after evaporation and crystallisation had reached the point where there was an "acceptable" level of water (in that case five percent). His Honour rejected the suggestion that the "end product" of the operation was brine. It was, his Honour thought, salt in crystallised form, freed from the water in which it was in solution. It may be noted that there was no submission made that the mining operation continued beyond the point of crystallisation and evaporation as has been made in the present case and it may be that there was no further evaporation or cleansing such as occurred here on the dry pile. Indeed that is consistent with the finding that the existence of a five percent moisture content was "acceptable". Barwick CJ, with whom McTiernan J agreed, in the passage already cited, was of the view that the process of evaporation, while not of itself mining, could be included in the expression "mining operations" where the evaporation was "so closely associated with the raising of the brine" and the recovery of sodium chloride it would be part of the mining operations. Such was the case in ICI. Menzies J who dissented, although seeing the "end process" of the taxpayer's operations in that case to be crystalline salt, was of the view that the mining operation concluded with the obtaining of "brine". Not so Gibbs J. In his Honour's view the mining operation included (at 582): "... the obtaining of salt by pumping brine from beneath the earth's surface." His Honour went on to say (at 583): "The object of ICI's operation was, I consider, to obtain salt, not to obtain brine. I agree, therefore, with the view taken by my brother Walsh that all the operations up to crystallizati2on formed part of the mining operations." The later case of Federal Commissioner of Taxation v Northwest Iron Co Ltd (1986) 9 FCR 463 provides further assistance. Without wishing to oversimplify the facts, it suffices to say that the taxpayer extracted crude iron ore from an ore body at Savage River. The ore so extracted was of poor quality and no commercial value. The ore was crushed and washed producing iron files in a liquid solution known as "slurry". The slurry was then pumped a considerable distance to Port Latta where there was a pelletising plant where ultimately the liquid was extracted and pellets produced. It was found that the mining operation continued in that case up to and including the production of the pellets. It was relevant in arriving at this conclusion that the slurry was not a marketable commodity and that the only saleable commodity available from the operations at Savage River was pellets. The fact that the pellet plant had been established away from the extractive process arose for economic reasons. Lockhart J, with whose reasons Bowen CJ and Toohey J agreed, said (at 474-5):

"The object of the taxpayer's activities is 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 pelletisation 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 a slurry containing powdered metal. ... The process of pelletisation 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 end product of the taxpayer's mining activities is the production of pellets." From these cases the following propositions may be extracted: (1) The point where a mining operation starts and finishes will be a question of fact to be decided in each case. However, the Court should not adopt a narrow view of the extent of "mining operations" so as to frustrate the legislative intent of providing a concession to the mining industry. (2) Relevant to this factual conclusion will be the ascertainment of the object of the particular taxpayer's operations. (3) Generally the mining operation will continue until there has been produced that which is the object of the particular taxpayer's operation of mining. (4) The mining operation will not necessarily be complete when a mineral has been extracted from ore, or where salt is produced, immediately there has been a recognisable salt product, be that brine or crystallised salt. It will be necessary that the mineral (salt) produced be saleable. (5) The mere fact that a mineral is saleable will not necessarily be determinative, if the production of that mineral at that place by that taxpayer would be uneconomic. Perhaps everything can be said to be saleable for a price, but what is necessary is that the mineral in question be economically saleable at least by a person in the position of the particular taxpayer. (6) Activities directed to improving that which is extracted, for example pelletising, may fall outside the ambit of the "mining operation". However, they may form part of the mining operation where the activity is closely associated with the actual extraction of the mineral. Normally this close association may be indicated by physical proximity, but lack of physical proximity will not necessitate the conclusion that the mining operation has concluded: North West Iron. The degree of integration of the activity with the actual mining process will, obviously, thus be relevant. In the present case it is clear that the first time there is a saleable product, as an outcome of the operations of Dampier, is when the salt has been dumped on the dry stock-pile, and has been mixed and cleaned and further evaporated. Although some of the salt recovered by Dampier and dumped on the wet stock-pile would be marketable as swimming pool salt, that is such a small fraction of what is produced that it may be ignored. The fact is that, on the evidence before the Tribunal, there was no economic market for the salt produced other than that into which Dampier in fact sold. Further, the activity which took place at the dry stock-pile was a continuation of the process of separation of the mineral, salt, from the water with which it was originally mixed; a continuation of the elimination of impurities through that further process of evaporation; and a continuation of the cleaning of the salt by a magnetisation process to remove impurities which may have been added during the evaporative process. The activity of transporting the crystallised salt to the dry stock-pile and the activities of mixing and cleaning which were conducted while the salt was on that stock-pile were so closely associated with the process of extraction of the salt and separation of it from the water in which it was originally embedded, that they fall within the concept of a mining operation. Thus in the present case Dampier's activity of producing common salt should be seen to continue until the crystallised salt had been transported to the dry stock-pile and mixed and cleaned at the dry stock-pile site. It was not open to the Tribunal to find otherwise on the facts before it. Since the 1995 amendments do not affect para (g) of the definition, it follows that the appeal should be dismissed with costs. It is thus unnecessary to decide whether the activity on the dry pile constituted "beneficiation" of the salt, being integrally connected with the operation of mining for salt. I certify that this and the preceding twenty-nine (29) pages are a true copy of the Reasons for Judgment herein of their Honours Einfeld, Hill and Carr JJ.

Associate: Date: 12 June 1996 Counsel and Solicitors Mr M.J. Buss QC and Mr K.J. Morgan for Applicant: Australian Government Solicitor Counsel and Solicitors Mr D.H. Bloom QC and Mr A. Sweidan for Respondent: Andre Sweidan Date of Hearing: 21 March 1996 Date Judgment Delivered: 12 June 1996

Excise Legislation Amendment Act 1995(Cth)

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Judgment (10 paragraphs)

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Legislation Cited (4)

Cases Cited (8)

Cited By (1)