Suntory (Aust) Pty Ltd v Commissioner of Taxation

Federal Court of Australia|2009-04-15|Before: Jagot J

APPLICATION 1 By an application filed on 3 April 2009 the applicant, Suntory (Aust) Pty Ltd (Suntory), seeks declarations and related orders in respect of certain excise duties. Suntory claims that it is not liable for and it is unlawful for the respondent, the Commissioner of Taxation (the Commissioner), to collect these excise duties. The excise duties in issue relate to "other excisable beverages" under item 2 of the Schedule to the Excise Tariff Act 1921 (Cth) at the rate set out in Schedule 1 of the Excise Tariff Proposal (No 1) 2008 on and from 19 March 2009.

FACTS 2 Suntory's claims arise in the following (agreed) factual context. On 26 April 2008 the Commissioner published a notice of intention to propose an Excise Tariff alteration increasing the duty payable on "other excisable beverages" (the Excise Tariff Proposal (No 1) 2008). The notice said that "the alterations operate on and from 27 April 2008". On and from that date the Commissioner collected excise duties at the higher rate specified in the Excise Tariff Proposal (No 1) 2008. On 13 May 2008 the proposed Excise Tariff alteration was moved by motion in the House of Representatives. On 11 February 2009 the Government introduced into the House of Representatives the Excise Tariff Amendment (2009 Measures No 1) Bill 2009 (Cth) containing the Excise Tariff alteration. The House of Representatives passed the Bill on 25 February 2009. The Senate rejected the Bill on 18 March 2009. The Commissioner continues to collect the excise duties at the higher rate. 3 Suntory has permission under s 61C of the Excise Act 1901 (Cth) to deliver goods for home consumption without entry, including "other excisable beverages". This permission (dated 24 December 2004) is subject to conditions including condition 3 as follows: 3. Liability to pay excise duty (a) You are liable to pay the excise duty on all the excisable goods which you deliver for home consumption. The liability arises on the day of delivery and is a tax-related liability for the purposes of Division 255 of the Taxation Administration Act 1953. (b) Subject to subsection (c) below, you must pay the excise duty at the rate in force on the day the excisable goods are delivered into home consumption. The rates for excisable goods are set down in the Schedule to the Excise Tariff Act 1921. (c) Notwithstanding the provisions of subsection (b), where any Excise Tariff or Excise Tariff alteration is proposed in the Parliament or by the Commissioner of Taxation subject to section 160B of the Excise Act (tariff proposal) which, if ratified by legislation, will affect the rate of duty imposed on the excisable goods which you deliver for home consumption, then from the day on which the tariff proposal is proposed, the rate of duty you are required to pay is the rate specified in the tariff proposal. (d) If the liability for excise duty remains unpaid after it has become due and payable, then under the authority provided by section 255-5 of the Taxation Administration Act 1953, a Deputy Commissioner of Taxation may sue you in a court of competent jurisdiction to recover the amount unpaid after it has become due and payable. 4 Suntory has not challenged the validity of any part of condition 3 of its permission under s 61C of the Excise Act.

LEGISLATION 5 As noted, Suntory claims that the Commissioner's continued collection of the increased duty on and from 19 March 2009, the day after the Senate rejected the Bill, is unlawful. The Commissioner claims that the applicable legislative scheme requires this proceeding to be stayed until after midnight on 13 May 2009. The competing claims of Suntory and the Commissioner must be resolved by reference to the legislation. 6 Section 2 of the Excise Tariff Act requires certain Acts, including the Excise Act, to be read as one with it. 7 Section 5 of the Excise Tariff Act specifies "Duties of Excise" by reference to the Schedule to that Act. Section 5(2)(b) contemplates amendments to the Schedule deemed to have come into force on a date earlier or later than the amendment. Section 6A of the Excise Tariff Act relates to indexation of rates of duty. Under s 6A(4D) the indexation provisions apply to an Excise Tariff alteration proposal which Parliament adopts with effect from the date of the proposal (rather than with effect from the later date of Parliament's adoption of the proposal). 8 Section 4(1) of the Excise Actdefines "Excisable goods" to mean "goods in respect of which excise duty is imposed by the Parliament, and includes goods the subject of an Excise Tariff or Excise Tariff alteration proposed in the Parliament". Section 4(3) defines both "Excise Tariff" and "Excise Tariff alteration" as follows: A reference in this Act or in any other Act to an Excise Tariff or Excise Tariff alteration proposed in the Parliament shall be read as a reference to an Excise Tariff or Excise Tariff alteration proposed by a motion moved in the House of Representatives, and an Excise Tariff or Excise Tariff alteration proposed by a motion so moved shall be deemed to have been proposed in the Parliament at the time at which the motion was moved. 9 Section 160B of the Excise Act expands the meaning of Excise Tariff and Excise Tariff alteration by vesting certain powers in the Commissioner (referred to as the "CEO" in the Excise Act). Section 160B(1) provides that, in certain circumstances, the Commissioner may publish in the Gazette a notice intended to propose in the Parliament an Excise Tariff or Excise Tariff alteration. Section 160B(2) provides: Where notice of intention to propose an Excise Tariff or an Excise Tariff alteration has been published in accordance with this section, the Excise Tariff or Excise Tariff alteration shall, for the purposes of this Act (other than section 114) and any other Act, be deemed to be an Excise Tariff or an Excise Tariff alteration, as the case may be, proposed in the Parliament. 10 Under s 54(1) of the Excise Act the licensed manufacturer or owner of excisable goods (depending on whether the owner enters the excisable goods for home consumption) is liable to pay the "Excise duty" on those goods. Section 58 regulates the entry and removal of excisable goods. However, s 61C(1) authorises the grant of a permission to a person to deliver for home consumption goods notwithstanding that an entry of the goods for home consumption has not been made and passed under s 58 of the Excise Act. In that event, the goods are deemed to be entered for home consumption on the day on which they are delivered (s 61C(2)). Such a permission may be subject to conditions (s 61C(3)). Section 59 requires payment on excisable goods at the rate in force when the goods are delivered into home consumption under s 61C(2) (s 59(a)) or when payment is made (s 59(b)), whichever is the earlier. 11 Section 109 of the Excise Act provides as follows: No proceeding shall be commenced against any officer for anything done in execution of or by reason of his or her office until one month next after notice in writing shall have been delivered to him or her or left at his or her usual place of abode by the plaintiff, or the plaintiff's attorney or agent, in which notice shall be clearly stated the cause and nature of the proceeding and the court in which the same is intended to be instituted, the name and place of abode of the plaintiff and the name and place of business of such attorney or agent unless the Supreme Court of a State or Territory has granted leave to the plaintiff to proceed without notice, which leave the Court may grant on such terms as it thinks just. 12 Section 114 of the Excise Act regulates the commencement of proceedings when an Excise Tariff alteration is initiated by a motion in Parliament or by a notice published by the Commissioner. Section 114 is in these terms: (1) No proceeding whether against an officer or otherwise for anything done (whether before or after the commencement of this section) for the protection of the revenue in relation to any Excise Tariff or Excise Tariff alteration proposed in the Parliament shall, except as mentioned in section 115, be commenced before the close of the session in which the Excise Tariff or Excise Tariff alteration is so proposed or before the expiration of 12 months after the Excise Tariff or Excise Tariff alteration is so proposed, whichever first occurs. (2) No proceeding, whether against an officer or otherwise, for anything done for the protection of the revenue in relation to an Excise Tariff or Excise Tariff alteration that is intended to be proposed in accordance with a notice under section 160B shall, except as provided in section 115, be commenced before: (a) the seventh sitting day of the House of Representatives after the date of publication of the notice, or the day on which the period of 6 months from the date of publication of the notice expires, whichever is the earlier day; or (b) where, on or before the earlier of the days referred to in paragraph (a), an Excise Tariff or Excise Tariff alteration that would validate the thing so done is proposed in the Parliament - the close of the session in which the Excise Tariff or Excise Tariff alteration is so proposed, or the expiration of 12 months after the Excise Tariff or Excise Tariff alteration is so proposed, whichever first happens. 13 "Officer" is defined in s 4(1) of the Excise Act as a person employed or engaged under the Public Service Act 1999 (Cth) who is exercising powers or performing functions under, pursuant to or in relation to a taxation law (as defined by the Taxation Administration Act 1953 (Cth)). The Commissioner is such a person. 14 The Commissioner noted that the period of 12 months after the Excise Tariff alteration for "other excisable beverages" was proposed in the Parliament expires at midnight on 13 May 2009. Suntory disputed the application of s 114 but not the calculation of this period. 15 Section 115, referred to in s 114, is as follows: The Supreme Court of a State or Territory on the application of any person who desires to commence any proceeding mentioned in section 114 against an officer may require the officer to give security to the satisfaction of the court to abide the result of the proceeding and in default of the giving of such security may sanction the immediate commencement of the proceedings. 16 These provisions of the Excise Tariff Act and the Excise Act are consistent with what has been described as the "invariable practice" of collecting excise duties "immediately on the introduction of any change in the tariff, and in anticipation of the measure affecting the change passing into law" (Ex parte Wallace (1892) 13 NSWR 1 at 7). In that case, the Supreme Court of New South Wales observed that "many Parliaments have given their sanction to the practice by passing statutes with a clause having a retrospective effect so as to legalise taxation which in the first instance was imposed without full Parliamentary authority" (at 9). The Court (at 9 - 10) described this practice as one: …based on sound reason and good sense, and devised by able and wise men in the public interests; a practice not only well established and known to all, but repeatedly sanctioned and ratified during a long course of years by the English Parliament. 17 The Court (at 7) observed that the public interest in the practice included preventing speculation on the imposition and rates of duties and protection of the Queen's revenue. Accordingly, the owner of goods who sought an order for their release without paying duty on the ground that the Bill proposing the duty had not yet become law could not enforce his strict legal right to the goods. The Court (at 9) said that making an order in the owner's favour would involve exercising a discretion "of a most pernicious and mischievous kind, tending to subvert" the invariable practice and (at 10) that "no one can have a legal right the giving effect to which is opposed to public policy or to the public weal".

SUNTORY'S SUBMISSIONS 18 Suntory submitted that it was entitled to the declarations and orders sought as: (1) It is axiomatic that the Executive cannot impose or collect tax without legislative warrant from Parliament (Gosling v Veley (1850) 12 QB 328 at 407). (2) The practice of collecting duties of customs and excise in advance is in anticipation of subsequent ratification by Parliament (Sargood Brothers v The Commonwealth (1910) 11 CLR 258 at 263). (3) Nevertheless, the collection in these circumstances remains unlawful (Alexander Cowan & Sons Ltd v Lockyer (1904) 1 CLR 460 at 466, Bowles v Bank of England [1913] 1 Ch 57, Mason v State of New South Wales (1959) 102 CLR 108 at 139, and Sargood Brothers at 263 - 264). (4) Section 114 of the Excise Act does not render lawful the collection of duties under an Excise Tariff alteration. (5) It is an undisputed principle that a taxpayer can recover the duty paid if the Parliament does not adopt retrospective legislation validating the proposal (Sargood Brothers at 263 - 264). (6) Section 109 of the Excise Act is not an answer to Suntory's claims. The proceedings are not against an "officer" in a personal capacity. The proceedings are not commenced for "anything done" because they concern the Commissioner continuing to collect duty at the increased rate. To the extent that s 109 purports to limit this Court's jurisdiction, s 39B of the Judiciary Act 1903 (Cth) prevails. In any event, s 4(2) of the Jurisdiction of Courts (Cross Vesting) Act 1987 (Cth) enables this Court to grant leave as contemplated by s 109. Suntory seeks that grant of leave if necessary. (7) Section 114 of the Excise Act is also not an answer. This section, like s 109, relates only to "anything done" and thus does not prevent proceedings for prospective relief. The Commissioner's actions cannot be considered to be done for the protection of the revenue. The Senate rejected the relevant enabling legislation on 18 March 2009 so there is no revenue to protect. Suntory does not submit that s 114 is inconsistent with Chapter III of the Constitution. But if construed as the Commissioner proposed, s 114 would impermissibly restrict this Court's original jurisdiction under s 39B(1A) of the Judiciary Act to prevent unlawful action by the Executive. Section 39B(1A), as the later provision, would prevail. In any event, legislative provisions are not construed so as to oust the jurisdiction of the courts if possible. Otherwise questions of validity would arise (Glennan v Commissioner of Taxation (2003) 198 ALR 250; [2003] HCA 31 at [13], Bodruddaza v Minister for Immigration and Multicultural Affairs (2007) 228 CLR 651; [2007] HCA 14 at [53]). (8) Section 114 does not operate as the Commissioner advocated. As the discussion in Ex parte Wallace discloses, the discretion of the Court is adequate to protect the revenue. Innes J, in particular, observed (at 12) as follows: Of course if there were any unreasonable delay in Parliament passing into law such a resolution as this, then the case would assume a different complexion. If…the session of Parliament came to an end without an Act having been passed affirming the resolution, or still more if Parliament, having been applied to to affirm the resolution, had thrown out the Bill introduced by the Government, the matter, of course, would have stood upon an entirely different footing. (9) There is presently no Excise Tariff alteration proposed before Parliament. Even if a new proposal were submitted that would not be the same Excise Tariff alteration as proposed. 19 Neither Suntory nor the Commissioner made any submissions about s 115.

DISCUSSION 20 Sections 4(3), 54, 58, 59, 61C, 160B, 109, 114 and 115 of the Excise Act are to be read as part of an overall statutory scheme. 21 First, and as the Commissioner submitted, nothing in the Excise Act indicates that s 114 is excluded if the Senate declines to pass a Bill giving effect to an Excise Tariff alteration. If a motion has been moved in the House of Representatives there is an Excise Tariff alteration for the purposes of the Excise Act (s 4(3)). This is the ordinary meaning of the definition of Excise Tariff alteration in s 4(3) and is consistent with the terms of s 114. It is also consistent with s 57 of the Constitution which regulates disagreements between the House of Representatives and the Senate. Section 57 of the Constitution contemplates that the proposed law may be re-introduced and makes such a re-introduction a condition precedent to a double dissolution. Accordingly, and adopting the Commissioner's written submissions at [29]: …the rejection of a Bill on one, or even more than one, occasion does not signal a definitive end to the parliamentary processes in respect of an Excise Tariff alteration proposal. With that being the case, the applicant would have to satisfy the Court that rejection of a Bill in the House of Representatives or the Senate did, in fact, constitute the end of Parliament's attempts to pass the legislation, notwithstanding the period in s 114 had not yet expired. This would inevitably require the Court to inquire into the actions and intentions of Parliament. 22 It follows that I do not accept Suntory's submission that the Excise Tariff alteration ceased to exist on the Senate's refusal to pass the Bill. Consistent with the terms of s 4(3) of the Excise Act, the Excise Tariff alteration retains its status as such and, thereby, the protection of s 114 in accordance with the terms of that section. Suntory's submission that any new Bill introduced into Parliament would be a different Excise Tariff alteration cannot be sustained in the face of ss 4(3) and 114 of the Excise Act and against the background of s 57 of the Constitution. These considerations support the Commissioner's submission that Suntory's application, before the expiry of the period in s 114, impermissibly calls for the Court to attempt to second guess what might occur in Parliament before midnight on 13 May 2009. That cannot be done (s 49 of the Constitution and s 16 of the Parliamentary Privileges Act 1987 (Cth)). 23 Second, and again as the Commissioner submitted, reading s 114 to apply only to past conduct because of the words "anything done" in the section would defeat the purpose of s 114. I do not accept Suntory's submission that the Court's discretion to refuse relief (as disclosed by the discussion in Ex parte Wallace) means that s 114 cannot operate as the Commissioner advocated. To the contrary, it seems clear that s 114 is a critical part of Parliament's recognition of the invariable practice of collecting duties "immediately on the introduction of any change in the tariff, and in anticipation of the measure affecting the change passing into law" (Ex parte Wallace at 7). If Suntory were correct about the meaning of "anything done" then any person subject to increased duty because of an Excise Tariff alteration could seek an injunction immediately to restrain the Commissioner from collecting the increased duty. Such an injunction, on Suntory's case, would be prospective and thus outside the scope of s 114. The section would thus, on this approach, permit proceedings for a type of relief the courts have long recognised as contrary to the public interest. 24 The words "anything done" in s 114 are part of a reference to "anything done for the protection of the revenue" in relation to any Excise Tariff or Excise Tariff alteration. The fact that "done" is a past participle and ordinarily would be read as referring to a past act does not determine the meaning of the section. The words "anything done" cannot be read in isolation from the context. As the High Court observed in Bankstown City Council v Alamdo Holdings Pty Ltd (2005) 223 CLR 660; [2005] HCA 46 at [27] "(m)uch must depend upon the subject, scope and purpose of" the section. Section 114 precludes the commencement of proceedings for specified periods. The section defines the beginning and the end of those periods. In this context, construing "anything done" as applying only to past conduct would have the effect of terminating the operation of the section from that prescribed by Parliament to some earlier date dictated by the commencement of proceedings. Further, the Excise Tariff alteration is itself a thing "done", as is the imposition of condition 3(b) on Suntory's permission under s 61C of the Excise Act. The continued collection of duties at the increased rate specified in the Excise Tariff alteration arises directly from these things that have been done. Finally, past participles may extend to future conduct if the context requires (see, for example, Currey v Sutherland Shire Council and Russell (2003) 129 LGERA 223; [2003] NSWCA 300 at [27] - [29]). 25 In this context, s 114 should be understood as Parliament's expression of the reasonable time to affirm (or refuse) an Excise Tariff alteration. The section thus supports the "invariable practice" which other sections (including ss 5 and 6A of the Excise Tariff Act and ss 61C of the Excise Act) also recognise. Section 115, with its reference to the giving of security to abide the result of proceedings, also indicates that s 114 operates over the whole of the period which the section specifies. 26 Third, I do not accept Suntory's submission that the collection of duties at the increased rate for "other excisable beverages" is not "for the protection of the revenue in relation to an…Excise Tariff alteration". This is the same purpose the Supreme Court of New South Wales protected in Ex parte Wallace by refusing relief in deference to the invariable practice of immediately collecting increased duties in anticipation of retrospective Parliamentary authority. In the present case the fact that the Senate rejected the Bill does not render nugatory the Excise Tariff alteration. Collecting duty at the increased rate for the period which Parliament has prescribed in s 114 is the very action the section contemplates for the protection of the revenue. 27 Fourth, s 114 does not oust the jurisdiction of the courts (noting that the Commissioner agreed with Suntory about the operation of the Jurisdiction of Courts (Cross Vesting) Act). The section provides a period before the expiry of which a proceeding may not be commenced. Even within that period the section provides for an exception in s 115. When ss 114 and 115 are read together (as they should be) I cannot discern any inconsistency between those sections and s 39B of the Judiciary Act. 28 Fifth, and insofar as Suntory made this submission with respect to s 114, I do not accept that the reference to "officer" in that section (or in s 109) is intended to refer to officers in their personal capacity only. The definition of "officer" in s 4(1) of the Excise Act includes the Commissioner in his or her capacity as a "collector" of duties also as defined in s 4(1). 29 Sixth, the fact that the Commissioner accepted that the increased duty would need to be re-payed if Parliament did not validate the Excise Tariff alteration does not lead to any different construction of s 114. Further, Suntory's reference to the Commissioner's collection of the duty at the increased rate as a form of extortion of an interest free loan (Mason v New South Wales at 139), exacted under the colour of office (Sargood Brothers at 264) is not of assistance. The collection accords with the "invariable practice" long seen by Parliament and the courts as necessary in the public interest. Parliament has recognised and effectively codified the "invariable practice" in the provisions of the Excise Act and Excise Tariff Act. While s 114 does not deem the collection of duties in accordance with an Excise Tariff alteration to be lawful (presumably because that would be inconsistent with any subsequent obligation for repayment), the capacity to grant permissions under s 61C subject to conditions is relevant to these claims. The reference to Excise Tariff alteration in condition 3(c) of Suntory's permission under s 61C of the Excise Act takes the same meaning as the definition of that term in the Excise Act (s 46 of the Acts Interpretation Act 1901 (Cth)). The condition is presumed to be valid unless and until declared void by a court of competent jurisdiction. Conditions requiring the payment of increased duty at the rate specified in an Excise Tariff alteration are consistent with the scheme of the legislation. For so long as the condition remains on Suntory's permission, it authorises the collection of duty on "other excisable beverages" at the increased rate. The undisputed fact that the Commissioner may become subject to an obligation for repayment if there is a total failure of consideration (in accordance with the principles in Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516; [2001] HCA 68) is a separate issue. It does not undermine the operation of the statutory scheme protecting the revenue until the period in s 114 expires. 30 For these reasons Suntory's submissions must be rejected and those of the Commissioner accepted. Section 114 applies to preclude the commencement of the present proceeding. As Suntory made no submissions seeking to engage s 115 of the Excise Act, the proceeding should be stayed until after midnight on 13 May 2009, consistent with the position advocated by the Commissioner. The parties may be heard on costs. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.

Associate: Dated: 15 April 2009 Counsel for the Applicant: Mr D Russell QC with Mr B L Jones

Solicitor for the Applicant: KPMG Tax Lawyers Pty Ltd

Counsel for the Respondent: Mr S J Gageler SC, Solicitor General of the Commonwealth with Mr S B Lloyd SC and Ms A M Mitchelmore

Solicitor for the Respondent: Australian Government Solicitor

(Imp) Acts Interpretation Act 1901(Cth)

Courts (Cross-Vesting) Act 1987(Cth)

Jurisdiction of Courts (Cross Vesting) Act 1987(Cth)

(2003) 129 LGERA 223

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