Secretary, Department of Industry, Tourism and Resources v Spicer Axle Structural Components Australia Pty Ltd

Federal Court of Australia (Full Court)|2007-11-02|Before: Tracey JJ

THE COURT 1 Australia's automotive industry struggles to be internationally competitive. Successive federal governments have devised programs to encourage investment and innovation in the industry. One such program is the Automotive Comprehensiveness and Investment Scheme ("ACIS"). A participant in relation to ACIS means a person registered by the Secretary of Industry, Tourism and Resources as one of: · a motor vehicle producer; · an automotive component producer ("ACP"); · an automotive tooling producer; or · an automotive service provider. 2 Participants in ACIS receive duty credits which can be used to: · Offset customs duty payable on certain imports. · Transfer to another entity. · Offset against an amount of unearned credit liability. 3 Participants in relation to ACIS are obliged to make quarterly returns to the Department on the basis of which they are eligible to earn "unmodulated credits". In the case of an ACP those credits depend on: · Expenditure on eligible investments. · Sales value of automotive components, machine tools, tooling and services. 4 Spicer Axle Components Australia Pty Ltd ("Spicer Axle") is a participant in relation ACIS as an ACP. A delegate of the Secretary determined, under s 94(1)(b) of the ACIS Administration Act 1999 (Cth) ("the ACIS Act"), that Spicer Axle had an unearned credit liability of 901,203 duty credits for the period starting in the first quarter of 1999 and ending at the conclusion of the last quarter of 2002. 5 Spicer Axle disputed that it had such an unearned credit liability. It appealed to the Administrative Appeals Tribunal ("the AAT") against the Secretary's decision. 6 The Tribunal found that Spicer Axle had not undertaken investment for the purposes of the ACIS Act because its investment had not been in a non-current asset in accordance with normal accounting principles. Nonetheless it held that Spicer Axle did not have an unearned credit liability because it had not received duty credits in any of the circumstances set out in s 94(1) of the ACIS Act. 7 Deputy President Forgie set aside the delegate's decision and substituted for it a decision that Spicer Axle did not have the unearned credit liability which the delegate had imported to it. The Secretary appealed to this Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). The appeal raised a number of questions of law. Under s 44(3) of the Act, the Chief Justice determined that this appeal should be heard by a Full Court.

THE INVESTMENT POINT 8 Spicer Axle contended that it had made what was known, under the ACIS, as a "Type D" investment. The Tribunal considered that Spicer Axle had not made such an investment. Section 6(1) of the ACIS Act provides that a type D investment: '… in relation to a quarter and an ACP, means investment undertaken by the ACP in that quarter … in that part of the ACP's approved plant and equipment that: (a) is used to produce automotive components, automotive machine tools or automotive tooling; or (b) is used to facilitate the provisions of automotive services.' 9 Under ss 6(1) and 6A of the ACIS Act "approved plant and equipment" which is "allowable plant and equipment" is that which is declared by the ACIS Administrative Regulations to be allowable. 10 The Tribunal was satisfied that Spicer Axle's automotive tooling was "approved plant and equipment" that is used to produce automotive components. However, it held that the investment was not taken to have occurred for the purposes of the ACIS Act. 11 The Tribunal referred to reg 13C(1)(a)(i) of the ACIS Administration Regulations 2000 which prescribes that an investment in plant and equipment undertaken by a participant is taken to have occurred for the purpose of the ACIS Act if: 'at the time when the plant and equipment is recognised, in the participant's accounts, as an asset in accordance with normal accounting practices.' 12 At [118] of her reasons for decision, Forgie DP said: 'In the absence of Spicer Axle's financial statements recognising the plant and equipment in this way, I am unable to make a finding that it is recognised in its accounts as required by reg 13C(1)(a)(i).' 13 The Tribunal decided that "asset" in reg 13C(1)(a)(i) means an asset "in the sense of a non-current asset". It held that the plant and equipment could not be regarded as a non-current asset. It had earlier noted that the arrangements into which Spicer Axle had entered for the development of the relevant automotive tooling was "a long and complex exercise" with a view to meeting the requirements of Spicer Axle's customer, the Ford Motor Co, to which ownership of the plant and equipment would pass.

THE SECTION 94(1) POINT 14 The Tribunal, having concluded that the relevant investment was taken not to have occurred for the purposes of the ACIS Act, next considered whether Spicer Axle was entitled to retain its 901,203 duty credits. 15 Section 94(1) of the ACIS Act, at the relevant time, provided that: 'A person who has or had duty credit is not entitled to the credit for any of the following reasons: (a) because of the making of an error in calculating the duty credit (including during the modulation process) or a mistake of fact; (b) because information given to the Minister, the Secretary or a delegate of the Secretary was inaccurate or incomplete; (c) because of a clerical error or mistake in the ledger.' 16 Section 95 provided that: 'If the Secretary determines that, because of a situation set out in section 94, a person is not entitled to a certain duty credit, the person is liable to pay to the Commonwealth an unearned credit liability.' 17 Section 96 quantified that liability as "an amount equal to the amount of duty credit to which the person is not entitled". 18 The Tribunal considered it critical that the Secretary's power under s 95 should only be exercised if one of the situations set out in s 94 had occurred. 19 The Tribunal held that the situation described in s 94(1)(c) had not arisen because there had been no clerical error or mistake in the ledger. It considered (at [149]) that s 94(1)(c) was "not a reference to a clerical error or mistake that happened outside the context of the ledger". 20 The Tribunal also considered s 94(1)(a) to be inapplicable because no error had been made in calculating the duty credit. At [160] the Tribunal compared the expression "work out" with the word "calculating". It said: 'The word "calculating" is given a narrower meaning to ascertain by mathematical methods or to signify an arithmetical calculation.' 21 At [163], the Tribunal concluded that: '… errors to which reference is made in s 94(1)(a) must be limited to errors of calculation in the sense of arithmetical errors … [and not] … errors in "working out", what, for example, is type D investment in the case of a particular ACP.' 22 At [165], the Tribunal held that the error had arisen not because of a mistake of fact but because of a mistake of law. 23 The Tribunal was not invited, by the appellant, to find that the delegate's decision could be supported by reliance on s 94(1)(b) even though it had been that provision which, alone, had been invoked when the delegate had decided that Spicer Axle was not entitled to credits.

CONSIDERATION 24 Counsel for Spicer Axle submitted that the Tribunal had correctly decided that the Secretary was not entitled to make a determination under s 95 because none of the situations identified in s 94 had occurred. Counsel contended that, if Parliament had intended to capture in s 94(1)(a) any errors occurring is the process of working out an unmodulated investment credit, there would have been no need to refer to "mistake of fact" in the same paragraph. Specifically they submitted that, if Parliament had intended to enact a statutory requirement for repayment in all circumstances in which a participant was not entitled to a duty credit, it could have simply said so. 25 In this context it is relevant to note two amendments to the ACIS Act which have been made by the ACIS Administration Amendment (Unearned Credit Liability) Act 2007 (Cth). A new sub-s (1A) was added to s 94 which reads: '(1A) a person who has or had duty credit is not entitled to the credit if the credit was issued in respect of an investment that was not an eligible investment.' By the same Unearned Credit Liability Act, s 95 was repealed and replaced by a new section which reads: '95 If: (a) a person has received duty credits; and (b) the person is not entitled to the credits (for a reason set out in s 94 or any other reason); the person is liable to pay to the Commonwealth an unearned credit liability.' Unlike its predecessor, the new s 95 does not make liability to make repayments depend on a determination having been made by the Secretary. 26 Counsel further contended that Spicer Axle had submitted quarterly returns claiming for type D investments in specified amounts and that the Secretary had issued it with relevant duty credits corresponding to the returns. No error in calculation could have occurred on the part of the Secretary. More importantly no evidence had been advanced tending to establish any such error. 27 Counsel for Spicer Axle also submitted that no mistake of fact within the meaning of s 94(1)(a) had been made by the Secretary who had not been shown to have been under any misapprehension either personally or by his delegate as to any particular issue of fact. 28 Counsel for the Secretary submitted that the construction of s 94(1)(a) adopted by the Tribunal would allow a participant to receive a benefit without satisfying the relevant criteria. They contended that either an error in working out duty credits or an error relating to the identity of the person entitled to duty credits could constitute a mistake of fact. 29 Counsel for the Secretary also submitted that the error in determining the type D investment was a mistake of fact, because the Secretary had no information to support the finding that Spicer Axle should not have received the duty credits. 30 We prefer the approach to the construction of ss 94 and 95 of the ACIS Act adopted by the Tribunal and supported by the submissions of counsel for Spicer Axle to the approach urged by counsel for the Secretary. The speech of the Minister for Industry, Tourism and Resources, on second reading of the Bill which became the ACIS Administration Amendment (Unearned Credit Liability) Act 2007, reveals that, when the ACIS was established, it was agreed by all participating parties that duty credits would be issued on receipt of quarterly claims. If, during the subsequent audit process, a reason disqualifying a participant from entitlement to a credit identified under s 95 should emerge, the relevant credit would be recouped. The process whereby recoupment was to be effected is set out in Part 9 of the ACIS Act. 31 Part 9 of the ACIS Act is headed "Unearned duty credit". Section 93 is headed "Overview of Part". It recites: '(1) This Part provides for duty credit to which a person is not entitled to be recovered. (2) Division 2 sets out the circumstances in which an unearned credit liability arises (section 94) and contains provisions concerning the amount of a liability. (3) To facilitate recovery of unearned credit liability, Division 3 provides for the offsetting of a person's duty credit against unearned credit liability. (4) Division 4 contains provisions concerning the time for payment of unearned credit liability, a late payment and extensions of time for payment. (5) Division 5 allows the regulations to deal with other matters concerning unearned credit liability.' 32 Part 9 constitutes a code dealing with the circumstances in which duty credits can be received. At the relevant time, duty credits could not be recovered except in the circumstances set out in s 94. None of those circumstances applied to Spicer Axle. The calculation of the duty was based on information given to the Department by Spicer Axle on the assumption of an entitlement to duty credits. There was no error in calculating the duty credits. There was no mistake of fact. There was no mistake or clerical error in the Secretary's ledger. The ledger merely reflected information given by Spicer Axle to the Department. The only mistake (if there was one) was as to the legal entitlement of Spicer Axle to receive the credits. The 2007 amendment which introduced s 94(1A) supports the view that the Act, at the relevant time, did not mean that an absence of legal entitlement to a credit entailed a liability to make a payment to the Commonwealth under s 95 of the ACIS Act: cf Commissioner of Taxation v Energy Resources of Australia Ltd (2003) 135 FCR 346, at 363. 33 As the Tribunal correctly determined that Spicer Axle did not have an unearned credit liability within s 95 of the Act, it is not necessary to consider the respondent's notice of contention which took issue with the finding of the Tribunal that its relevant investment was not taken to have occurred for the purposes of the ACIS Act. 34 The appeal should be dismissed with costs. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Ryan, Marshall and Tracey.

Counsel for the Appellant: Mr P Hanks QC & Mr J Stephenson

Solicitor for the Appellant: Australian Government Solicitor

Counsel for the Respondent: Mr C Caleo SC & Mr M Fleming

Solicitor for the Respondent: Home Wilkinson Lowry

ACIS Administration Act 1999(Cth)ss 6, 93, 94, 95

ACIS Administration Amendment (Unearned Credit Liability) Act 2007(Cth)

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