Australian Petroleum Supplies Pty Ltd & Others and Giuliano
[2001] AATA 1050
•24 December 2001
CATCHWORDS – EXCISE – whether blending of petroleum products to produce excisable blended petroleum products - burden of proof – whether excisable goods in possession, custody or control of applicants or any of them – whether applicants failed to keep excisable goods safely or failed to account for them – decision affirmed
Excise Act 1901 ss. 4, 34, 35, 45, 46, 50, 52, 53, 54, 60, 61, 77, 77G, 77H, 117, 119, 120, 129, 133, 144, 160, 162C,
Crimes Act 1914 s. 21B
Administrative Decisions (Judicial Review) Act 1977
Customs Act 1901 ss. 8, 33, 153, 233B
Taxation Laws Amendment (Excise Arrangements) Act 2001 ss. 4, 5, 6, 12, 13
Public Service Act 1999
Excise Tariff Act 1921 Items 2, 11, 12 of the Schedule, ss. 2, 6G, para. 11(E)(2)
Broadcasting and Television Act 1942 (Cth) s. 19(2)
National Health Act 1953 s. 99K
Tax Assessment Acts (Nos. 1 to 9) 1930-32
Income Tax Assessment Act 1936 s. 264
Business Franchise Licences (Tobacco) Act 1977 (NSW) s. 33
Landlord and Tenant Act 1958 (Vic) s. 28
Administrative Appeals Tribunal Act 1975 s. 33
Corporations Law ss. 135, 198A
Administrative Decisions (Judicial Review) Act 1977 s. 9A
Sidebottom v Commissioner of Taxation (1999) 95 FCR 255
Sidebottom v Guiliano (2000) 98 FCR 579
Goben Pty Ltd v Chief Executive Officer of Customs (1997) 149 ALR 102
F.H. Faulding and Co. Limited and Collector of Customs, No. G50 of 1990, 23 August, 1991
McDonald v Director-General of Social Security (1984) 6 ALD 6
Australian Postal Commission v Burgazoff (1989) 10 AAR 296
Elleissy v Australian Telecommunications Commission (unreported, Federal Court, No G836 of 1988, 14 July 1989)
Barker v Australian Telecommunications Commission (1990) 95 ALR 72
Casarotto v Australian Postal Commission (1989) 10 AAR 191
Commonwealth v Muratore (1978) 141 CLR 296
Swan Television and Radio Broadcasters Ltd v Australian Broadcasting Tribunal (1985) 8 FCR 291
Australian Broadcasting Tribunal v Bond Corporation Holdings Ltd (1989) 86 ALR 424
Re O'Neill and Pharmaceutical Restructuring Authority (1993) 17 AAR 434
Deputy Federal Commissioner of Taxation of the State of South Australia v Ellis and Clarke Pty Ltd (1934) 52 CLR 8
Collector of Customs (NSW) v Southern Shipping Co. Ltd (1962) 107 CLR 279
The King v Lyon (1906) 3 CLR 770
He Kaw The v The Queen (1985) 157 CLR 523
The Chairman, National Crime Authority v Flack (1998) 156 ALR 501
The Commissioner of Taxation v The Australia and New Zealand Banking Group Limited (1977-79) 143 CLR 499
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
Weissensteiner v The Queen (1993) 178 CLR 217
Stephens v R (1978) 21 ALR 680
Bollinger v Chief Executive Officer of Customs (AAT 12199, 11 September, 1997)
The Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd and Wright and Bryce, [2001] QCA 280, unreported, 20 July, 2001
Chief Executive Officer of Customs v Jiang [2001] FCA 145
Moama Refinery Pty Ltd v Chief Executive Officer of Customs [2001] FCA 1287
Wing On and Company Limited v The Collector of Customs for NSW (1938) 60 CLR 97
DECISION AND REASONS FOR DECISION [2001] AATA 1050
ADMINISTRATIVE APPEALS TRIBUNAL ) V2000/230, V2000/231
) V2000/232, V2000/233
GENERAL ADMINISTRATIVE DIVISION ) and V2000/234
ReAUSTRALIAN PETROLEUM SUPPLIES PTY LTD; KELVIN ERNEST SIDEBOTTOM, RAYMOND LESLIE SIDEBOTTOM, RPM COMMODITIES PTY LTD AND
GV LIQUID TANKERS PTY LTD
Applicants
AndEMMANUEL GIULIANO
Respondent
DECISION
Tribunal: Miss S A Forgie (Deputy President)
Mr W G McLean (Member)
Date: 24 December, 2001
Place: Melbourne
Decision:The decision of the respondent dated 31 January, 2001 is affirmed.
S A FORGIE
Deputy President
REASONS FOR DECISION
On 25 February, 2000, the applicants, Australian Petroleum Supplies Pty Ltd ("APS"), Kelvin Ernest Sidebottom ("Kelvin Sidebottom"), Raymond Leslie Sidebottom ("Raymond Sidebottom"), RPM Commodities Pty Ltd ("RPM") and GV Liquid Tankers Pty Ltd ("GVLT"), applied for review of a decision of the respondent dated 31 January, 2001 by a Collector, Mr Emmanuel Giuliano ("the Collector") to demand from each of them the sum of $9,289,732.33 (later amended to $9,222,022.79). The amount demanded was claimed to be an amount equal to the amount of excise duty which would have been payable on certain goods if they had been entered for home consumption on the day the demand was made. It has since been reduced but its precise amount is not relevant to the issues we must consider. The goods which were the subject of the demand were various quantities of petroleum products that the Collector determined were excisable blended petroleum products. The basis on which the amount was demanded was that each of APS, Kelvin Sidebottom, Raymond Sidebottom, RPM and GVLT had been entrusted with the possession, custody or control of excisable goods, which were subject to the control of Customs, and each had either failed to keep those goods safely or, when requested by a Collector to do so, had not accounted for them to his or her satisfaction.
At the hearing, the applicants were jointly represented by Mr Murphy and Ms Lodge of counsel and the Collector by Mr Walters and Mr Livermore of counsel. Mrs Marilyn Sidebottom and Mr Brett Sidebottom gave evidence on behalf of the applicants while Mr Trevor Walker and Mr Gregory Meredith gave evidence on behalf of the Collector. The documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 ("AAT Act") ("T documents") were admitted in evidence together with various documents to which we will refer in the course of these reasons.
THE ISSUES
The issue in this case is whether the Collector should have issued a demand pursuant to s. 60(1) of the Excise Act 1901 ("the Act"). That requires a consideration of two subsidiary issues. The first is whether the goods which were the subject of the demand were excisable blended petroleum products. If they are such products, the second is relevant. That issue is whether the applicants, or any of them, had possession, custody or control of the goods prior to their being requested by the Collector to account for them to his satisfaction.
BACKGROUND
There was no dispute between the parties regarding certain matters forming the background to the issues to be decided between them. In view of that and having regard to the evidence, we have made a number of findings of fact that we will set out in the following paragraphs.
Since 1995, the directors of APS, RPM and GVLT have been Raymond Sidebottom and his wife, Marilyn Sidebottom. Until 18 February, 1998, Kelvin Sidebottom and Dorothy Ellen Sidebottom were also directors of each of the companies. Kelvin Sidebottom is Raymond Sidebottom's father. Two ordinary shares have been issued in each of the companies. In the case of APS, which was known as Vamvet Pty Ltd until 8 June, 1995, both are held by Raymond Sidebottom. Kelvin Sidebottom and Dorothy Ellen Sidebottom each holds one of the shares issued in RPM and GVLT. The principal place of business of APS and GVLT is shown as an address in Southport, Queensland in the records held by the Australian Securities and Investment Commission ("ASIC"). The principal place of business of RPM is an address in Numurkah in Victoria.
APS carries on business as a wholesaler of petroleum products. It purchases from various suppliers of petroleum products and sells to various customers. GVLT operates a freight business and carries various liquid products and grains. Its largest customer is APS for which it carries petroleum products.
The premises at Numurkah are owned by RPM. On that land is a retail petrol pump station with various underground and above ground storage tanks Also situated there is a tanker workshop, a truck wash with an adjacent tanker distillate fill point, an office and a water treatment area. APS purchases and sells petroleum products. It purchases from wholesale distributors situated in various places including Queensland and New South Wales. It sold to a variety of customers including large trucking companies. GVLT owns prime movers and tankers. Either by using its own prime movers and tankers or by engaging contractors, it collects and delivers petroleum products for APS.
Various documents were obtained from various locations on the premises at Numurkah, Kelvin Sidebottom's house, Neumann Dredging Co Pty Ltd trading as Neumann Petroleum ("Neumann Petroleum") and Gladstone Chemicals. As described in paragraph 16 of the Collector's statement in the T documents and agreed by the applicants, those documents included:
"(a) a handwritten ledger called a 'Depot Stock Balance' recording the purchase of distillate (diesel fuel) and other petroleum products, especially solvents, and the movement of those products into stock at the Depot during the period from 17 July 1996 until 13 January 1997 …;
(b)a series of invoices from … Neuman Petroleum, APS's Queensland supplier of diesel fuel, relating to the purchase of such fuel during the period from 1 July 1996 to 1 August 1997 …;
(c)a series of invoices relating to the purchase of various solvents and other products such as kerosene from each of the APS's Queensland or New South Wales solven suppliers, namely Logistix Trading Pty Ltd, Dichem Trading Pty Ltd, Dartwell Pty Ltd, and Petrosol Pty Ltd during the period from 1 July 1996 to 1 August 1997 …;
(d)a series of invoices from Gladstone Chemicals, a Melbourne supplier, relating to APS's purchase of quantities of products named 'Solvent X-370' and 'Solvent 1H' covering the period from 30 August 1996 to 10 July 1997 …;
(e)a series of Australian Petroleum Supplies sales invoices for diesel fuel and other products covering the period from 8 July 1996 to 3 February 1997 …;
(f)APS's cash payments book for 1996 showing all payments made for fuel during that calendar year …;
(g)a series of documents purportedly being despatch forms relating to cash sales of various solvents during the period from 17 July 1996 to 19 November 1996 …;
(h)a series of documents purportedly being invoices for the sale of various solvents during the period from 19 November 1996 to 8 August 1997 …;
(i)records relating to deposits into APS's National Bank account numbered 63291-1726 referable to funds received during the period 1 July 1996 to 1 August 1997, namely handwritten banking sheets covering the period 17 July 1996 to 28 July 1997 and deposit book pages covering the period from 1 July 1996 to 19 August 1997 …;
(j)truck log payment sheets relating to various tankers operated by GV Liquid Tankers Pty Ltd for all months from July 1996 to July 1997 (both inclusive) …;
(k)APS's office diaries for 1996 and 1997 covering the period from 1 July 1996 to 1 August 1997 …;
(l)miscellaneous documents relating to APS's business …"
On 29 October, 1998, the Chief Executive Officer of Customs ("CEO") issued proceedings in the Supreme Court of Victoria claiming that each of the applicants had (contrary to s. 35) manufactured excisable goods otherwise than pursuant to a licence, had (contrary to s. 117) in its or his possession, custody or control of manufactured excisable goods upon which excise had not been paid and (contrary to s. 120(1)(iv)) evaded payment of duty which was payable. The CEO seeks declarations that each of the applicants has committed the offences and asks for orders that they be convicted. He seeks the imposition of fines and penalties pursuant to Part X of the Act and orders for reparation under s. 21B of the Crimes Act 1914. Those proceedings are continuing.
On 16 March, 1999, the Collector made a request to each of the applicants regarding quantities of petroleum products transported to the premises at Numurkah on or about dates, which he specified and which were between 1 July, 1996 and 31 July, 1997. The Collector claimed that petroleum products were mixed together or mixed with other substances on or about those dates and that excisable goods were produced on each occasion. He requested each of the applicants, being an entity with possession, custody or control of the excisable goods produced between 1 July, 1996 and 31 July, 1997 to account for them. If the goods could not be satisfactorily accounted for within seven days of his letter, the Collector stated that it was his intention to demand formally an amount equal to the amount of excise duty in accordance with s. 60(1) of the Act.
On 24 September, 1999, Finkelstein J delivered his judgement in Sidebottom v Commissioner of Taxation (1999) 95 FCR 255. One of the issues in the case concerned the validity of the Collector's requesting the applicants to account for the goods in terms of his letter of 16 March, 1999. It was challenged under the Administrative Decisions (Judicial Review) Act 1977. His Honour decided that:
"In my view, there is nothing in the nature of an ultimate or operative decision, or of a substantive determination, in the decision to make a request for an accounting. It is merely the first step in an inquiry that is designed to elicit information in the course of making a determination as to whether a demand under s 60(1) should be issued. Accordingly it is not a decision that is reviewable under the Judicial Review Act." (page 260)
On 31 January, 2000, the Collector wrote again to each of the applicants. He stated that each had failed to provide any account for the goods as required by s. 60(1)(b). Furthermore, he stated that each had failed to keep those goods safely as required by s. 60(1)(a). Pursuant to s. 60, he issued a demand in respect of those goods. None of the applicants provided any accounting for the excisable blended petroleum product identified in the Collector's request.
Each of the applicants issued proceedings in the Federal Court claiming that the Collector's requests to account for the goods pursuant to s. 60(1)(b) had no legal effect (Sidebottom v Guiliano (2000) 98 FCR 579). Finkelstein J decided that the Collector had not made an error of law in issuing the requests. Had it been established as an undoubted fact that persons in possession, custody and control of excisable goods had failed to keep them safely, no purpose would be served by an accounting pursuant to s. 60(1)(b). That section could only be relied upon where there is doubt about the whereabouts of excisable goods or doubt about whether or not they have been kept safely. The person in possession, custody or control must then satisfy the Collector that the goods have not gone into home consumption without the payment of excise duty. As it was, the Collector did not form an opinion that it was an undoubted fact that the applicants had failed to keep safely excisable goods. The applicants themselves denied that they had possession, custody or control of any such goods. In the circumstances, Finkelstein J concluded, the revenue may require protection by the Collector's exercising his power to request an accounting under s. 60(1)(b).
THE EVIDENCE
Mrs Marilyn Sidebottom
Mrs Marilyn Joy Sidebottom gave sworn oral evidence on behalf of the applicants in support of her written statement dated 30 March, 2001 (Exhibit A). In addition to her role as a director of APS, RPM and GVLT, Mrs Sidebottom said that she is a part-time employee of APS working for two days each week. Her duties require her to answer the telephone, maintain APS's salary records, cash receipts and payment books of account and reconcile the cash-books with related bank statements. She also deposits cash and cheques at the bank. Mrs Sidebottom said that this was as far as she went and that the accountants took the accounts further. The accountants completed the financial statements and tax returns of the companies. She would have liked to attended meetings with the accountants but did not due to her family commitments. If product was purchased or sold on credit, this was handled by Mr Kelvin Sidebottom. She had nothing to do with it, she said.
In her oral evidence, she said that she undertook these duties as a director of the three companies. She also said in her oral evidence that Mr Kelvin Sidebottom worked full-time running the business. Her husband was also in the business but he was often away. She did not know precisely where he went but he was seeing customers. At the time, Mr Kelvin Sidebottom had the primary role and occupied the only office. If her husband was at the depot, he worked on the trucks or occupied a spare desk in the corner of the main office.
APS, she thought, became involved in wholesaling petroleum products in 1995 or 1996. In her statement, she said that GVLT undertook cartage for APS at agreed and set cartage rates.
In her statement, Mrs Sidebottom said that RPM owns land at Numurkah in Victoria and, since 1990, part of that land has been occupied by APS. There is no written tenancy agreement but each month APS pays $4,387 to RPM as rent for that part of the property it occupies. In her oral evidence, Mrs Sidebottom said that the land was partly owned by RPM and partly by APS. APS owns the land that faces the north, part of the western end and part of the southern end. The part that is not occupied by APS is the western part of the land. The workshop and trucks are kept on that part. Mrs Sidebottom said that she did not know whether RPM owned the tanks on the land.
She identified as the handwriting of Mr Kelvin Sidebottom the writing appearing opposite 20 January, 1995 in a diary seized pursuant to a warrant (T documents, page 63 and No. A562149, page 278). It read:
"Contract between A.P.S. Queensland and R.P.M. Commodities Numurkah to rent storage tanks and dispensing equipment for petroleum products. To store fuel for A.P.S. customers until they wish to collect the product & pay for it."
Mrs Sidebottom said that she had not seen the entry before as it was her father in law's diary and she would not see it. She had made her statement without looking at documents and without talking to either her father in law or her husband. She would not know whether they would know the precise details of the agreement. The amount paid for rent was an amount she knew although she had not consulted the ledgers to check it. The amount of rent was calculated on the basis of what it was thought to be worth.
Mrs Sidebottom said that she "would think" that the tanks would be structurally fixed to the land but she had not walked down to the back of the property before 1996 or 1997. Since then, she has walked down once or twice. Some of the tanks are underground. Later, she said that they were placed in steel frames, bunting was put around them and each is surrounded by bricks about a metre high. She did not know how they were fixed to the ground. The tanks are located behind the workshop and could not be seen from the service station.
In her statement, Mrs Sidebottom said that RPM had no other dealings with the business of APS. When shown a balance sheet for RPM dated 30 June, 1997 showing a loan from APS amounting to $198,248.57 (T documents, volume 17A, page 180), Mrs Sidebottom said that she did not know what that loan was about and did not know about any loan between RPM and APS. The first she knew of it was when shown the balance sheet at the hearing and presumed that her father in law knew about it. The balance sheet did not alter the written statement she had made. She said that she had done the best that she could and checked the best that she could.
Mrs Sidebottom also said that she was unaware of a loan from APS to GVLT amounting to $109,349.91 and shown in GVLT'S balance sheet for the year ending 30 June, 1997 (T documents, volume 17A, page 189). She had not looked at any documents before making her statement. The matter was "too in depth" for her, she said, and she had made her statement on what she understood. She had carried out her role as a director as best she could. She had not asked her father in law or her husband as she was confident in what she was doing. Her statement had been made on the basis of what she believed, she said.
Mrs Sidebottom said that she knew of the Depot Stock Balance document but had never made entries on it. It was written in her father in law's hand. In her statement, she had said that, during the period July, 1996 to August, 1997, APS sold various quantities of solvent products, diesel, kerosene, leaded petrol and unleaded petrol. In cross-examination, she agreed with Mr Walters that she was not in a position to know the various quantities. If product was sold, she put the sales in the ledger and if product was paid for, she deposited the cash and the cheques. She obtained information for her father in law and relied on him. As to the amount paid for various products, she had no idea, she said.
Mrs Sidebottom said that blending would not have occurred as her father in law is honest and would not do it. She had first become aware that blending attracted duty when she received the demand. Up until that time, no-one had discussed the matter with her. Mrs Sidebottom identified the following document as being in Mr Kelvin Sidebottom's handwriting:
"Fuel costs are the largest expense to any transport operator. Large operators have been substituting their fuel for years to keep their costs down so they can [illegible] cheaper prices to obtain big contracts. There was know law banning anyone from using H.O. in their own vehicle. The oil companys have been mixing H.O. & Dist for years & calling it winter mix. This mixture will not damage a vehicles engine providing it is not over done. This has been going on for years via oil companys & big distributors and they have pocketed the profits.
We have past on the difference in a discount.
It is OK for the big guys who appear to be clean but not the little blokes. Pricing difference between Melbourne and country has long been a farse that the govt. has let the oil companys get away with because of the [illegible] they receive in many ways.
We get a new politison who before he is elected states that he will fite for cheaper fuels for the country but when elected learns very early to leave this area alone and drops it. The oil companys pay approx 1.8 cents freight to this area by road but charges up to 10 cents more for the product in this area. Where does the difference go knowone ever asks & the poor old country-ite keeps on paying. We hear every day on news & press that farmers & manufactures in this country should make thereself more efficient to keep costs down so we can be more competitive with our overseas counterparts. Then all of a sudden up goes the fuel prices.
Transport is a very large cost on all manufacturing & primary production and yet we do not have a single body working on a way to get the price of fuel down or trying to come up with a suitable allternative fuel that will reduce transport costs. We have been testing one in our own vehicles now for 2 months & we now believe we have the …" (volume 9, page 284, T documents, page 59, document A993220/7)
She also identified the following document as written in his handwriting:
"PRICE TRUCTURE (sic)
A 50/50
34000 BRIS @ 56.8 = 19312.00
34000 MLB @ 43.5 = 14790.00
68000 @ 50.15 = 34102.00
B 1/3 / 2/3
34000 BRIS @ 56.8 = 19312.00
17000 MLB @ 43.5 = 7395.00
51000 @ 52.36c = 26707.00
END RESULT A
68000 @ 60c = 40800.00
- 68000 @ 50.15 = 34102.00
3500 KLM = $1.91c = 6698.00END RESULT B
51000 @ 60c = 30600.00
- 51000 @ 52.36 = 26707.003500 KLM = $1.11 = 3893.00
A C END RESULT
68000 @ 59c = 40120.00
- 28000 @ 50.15 = 34102.00
3500 KLM = $1.71c = 6000.00"(T documents, volume 9, page 60, document A993220/8)
Mrs Sidebottom said that her father in law had never discussed this document with her and had never discussed blending. Mrs Sidebottom said that she knew nothing about the document. Mr Kelvin Sidebottom would know the most and she did not know whether Mr Raymond Sidebottom would know.
Mr Brett Sidebottom
In addition to his oral evidence, Mr Brett Sidebottom, who is also a son of Mr Kelvin Sidebottom, said that he finished school at the age of 15 years when he began working for his father at his service station. After some six or eight months, he began a five year apprenticeship as a diesel mechanic. At the age of 22 years, he acquired his truck.
Mr Brett Sidebottom said that he is employed by his own company, CID Pty Ltd ("CID"), of which he and his wife are directors, and is also the transport manager of APS. Mr Brett Sidebottom was unable to indicate who was the secretary of CID. In cross-examination, he said that his father maintains the financial records of CID and, although he was unsure who or how his services were paid for, presumed that they were probably paid by GVLT. In cross-examination, he said that he could not recall whether he was paid by APS or GVLT.
CID was paid by either APS or GVLT but he presumed that it was GVLT as he organised the vehicles for GVLT. He was paid once a month with a cheque signed by either his father or his brother but he could not recall whether it was drawn on the account of APS or that of GVLT. GVLT made the deliveries for APS either by using its own trucks or the trucks owned by sub-contractors. CID employed a driver in addition to Mr Brett Sidebottom. In re-examination, he said that CID paid him as well as the second driver.
In addition to his carrying out the duties of transport manager of APS, Mr Brett Sidebottom said that he personally owned a prime mover. He could not recall the registration number of that prime mover. Occasionally, he drove that prime mover to haul fuel tankers used by APS for the delivery of petroleum products but has since stopped driving full-time. He could not remember when he stopped driving on that basis. A driver called "Mick" drove his own truck (registration EUI.471) to transport fuel. Apart from the registration of Mick's truck, Mr Brett Sidebottom recognised a lot of the registration numbers on the Depot Stock Balance as GVLT trucks.
Mr Brett Sidebottom said that his father was always at the depot when he arrived. Either his father, brother or he would close the depot at night. Mr Brett Sidebottom said that he took direction from his father and brother and could not go off on a frolic of his own. He was not responsible for paying for product. Petroleum products were not the only products he moved. On occasion, he arranged the movement of canola oil for a local company. It was carried to either Sydney or Brisbane. The tankers used to transport the canola oil would be steam cleaned.
Mr Brett Sidebottom agreed with Mr Livermore that, presumably, any product delivered in GVLT's trucks or his trucks would be recorded in the log books for those trucks. The trips were recorded in the log books by the drivers, he said. He just filled in the drivers' names but never otherwise looked at them. Perhaps he should have, he said. He did not give them to his father. Mr Brett Sidebottom said that he had not seen the document "Extracts from office diaries of APS for 1996 1997" (T documents, T14) but it was of a type with which he was familiar. It was a document which probably recorded what drivers had been doing but it was not a document to which he had been given access as Transport Manager.
Mr Brett Sidebottom said that he did not have access to the Depot Stock Balance although he saw his father working on it each morning. He said that he did not keep such records as he just directed where the trucks went. It would presumably be useful as Transport Manager, he agreed with Mr Livermore, if he had known the "invoice litres in" as shown on the Depot Stock Balance but he did not use it. He did dip tankers when they arrived at the depot but probably noted the reading on a piece of paper, which he did not keep. Mr Brett Sidebottom said that he probably put notes on a pad of all the products coming into and going out of the depot but he could not remember. When asked why he had not said in his statement that he had probably noted the products on a pad, he replied that he did not know. The Depot Stock Balance was not his document and he did not agree with Mr Livermore that he was making up his evidence as he went along. His job as Transport Manager was to organise the trucks and their loading and unloading. As far as documentation was concerned, Mr Brett Sidebottom described himself as "not intelligent" and a "fairly basic sort of person" and the document as being "way over my head". The operation was mostly run by his father but he knew that he did not blend anything. Mr Brett Sidebottom said that he himself had blended only to make two stroke fuel.
When asked in cross-examination whether he had given the readings he took when dipping the tankers to anyone, Mr Brett Sidebottom replied that he could not recall. He did not record the readings in his diary. All that he could recall was dipping tanks. He could not recall recording the information or being asked to record the information. In re-examination, Mr Brett Sidebottom said that he knew what was in the tanker from the paperwork he received in the form of a shipping document. If there were a difference, he would not worry about it but, to his knowledge, there was never an occasion when too little product was delivered.
Mr Brett Sidebottom said that he was not aware of a letter dated 28 October, 1996 written to the National Bank setting out details of stock held and bank balances held by APS and GVLT with the bank. As Transport Manager, it was part of his job to determine what went in some tanks and what went in others. He could have spoken to his father or to his brother, Ray. They were the ones doing the deals, he said. As to the price he was supposed to charge, he probably discussed that with his father or Ray. They set the prices and he did what he was told to do. When shown the handwritten document regarding fuel costs (T documents, page 59, document A993220/7, see paragraph 23 above), Mr Brett Sidebottom said that the writing appeared to him to be either that of his father or brother. In relation to the document dated 29 April, 1997, he said that he did not do the pricing and also that he did not know the prices of the various products.
Although he was the Transport Manager, he said in cross-examination that he did not recall ever being asked about transport costs. When asked how his father and brother could have worked out the pricing without asking him for transport costs, he said that they had both been involved in the transport industry for years and had their own ways of working pricing out. In his statement, Mr Brett Sidebottom had said of transport costs:
"The cost of cartage is worked out at a cents per kilometre rate. This rate includes all expenses associated with transport including fuel, tyres, depreciation of the vehicle and overheads. In order to minimise the cost of cartage and take advantage of opportunities in the petroleum products market, the ability to quickly assess the merits of buying and selling products and moving them between locations (even if the profit in buying and selling individual loads is on its face small or marginal) is critical." (Exhibit C, paragraph 11)
Mr Brett Sidebottom said that the document showing registration numbers and figures was written in his handwriting (T documents, page 166, document A658121/63). He acknowledged that it is possible to partly fill a tanker from one tank at the depot and partly from another. The truck registration number EUI.471 referred to in that document holds only 8,300 litres.
Mr Brett Sidebottom said that he had heard of winter mix or alpine mix. He did not know whether he had ever used it and did not know about its effect on an engine. He did not know whether he had discussed blending with his father. The document regarding the cost of fuel (document A993220/7; see paragraph 23 above) could have been written by either his father or his brother, he said. He did not know if APS had made either winter mix or alpine mix and passed on the savings to the customers. His own fuel had been obtained from APS but he did not know whether he was given a discount or not. When asked whether heating oil was cheaper than diesel fuel or not, Mr Brett Sidebottom questioned whether it was. He did not care whether kerosene, waste oil and heating oil are cheaper than diesel fuel.
Mr Sidebottom said that he had never seen or been present to observe the blending of petroleum products by APS. He said that he did not maintain any records of what was kept in the depot storage tanks nor was he aware of the safety regulation requirements for the storage or transport of petroleum products. Mr Brett Sidebottom said that he had never seen a document from ADI setting out the results of testing distillate samples (T documents, page 68, document A650466). The document set out the results for samples numbered 4, 5 and 6. Numbers 4 and 5 were marked by hand drawn arrows and the word "61.9" and the word "Caltex" written under them. Number 6 had "69.0" and "A.P.S." written under it. Mr Brett Sidebottom thought that it looked like some sort of test results. In response to Mr Livermore's question whether he had ever been involved in sending samples of fuel for testing, he replied "probably, possibly, not sure". He did not know which was the correct answer and did not know whether he had seen his father send samples for testing. He had never sent samples of blended products for testing. The figures 61.9 and 69.0 did not mean anything to him in terms of flash points.
The writing on a diary page for 29 and 30 June, 1995 (T documents, page 70) was, in the main, that of his father. The document set out vehicle registrations and drivers. He could not recall whether he had ever discussed a product that has 60% crude oil and 40% waste. The reference to "diptanks" was in either his father's or his brother's writing. He could not recall whether he had seen a memorandum headed "Dangers concerning 'funny diesel'" (T documents, page 72, document A0562164/26), which had been found at APS's premises and either denied or was not sure whether he had discussed the article with his father or brother. He did not know how APS had come to have the document in its possession but had heard that someone had been hurt from a blended petroleum. The document reads:
"It has been brought to our attention by Mr. Bill Cane, South Australian Department of Occupational Health, that there have been three people severely burnt due to incidents involving 'FUNNY DIESEL'.
This product is being produced in Numurkah, Victoria, by mixing Top Crude Oil, Heating Oil, Sump Oil and out of date Jet A Fuel (kerosene). The product has a flash point which starts at less than 5oC and goes up to 20oC which makes it very susceptible to ignition.
This mixture is being shipped around Australia in unmarked tankers, therefore, any person attending an unmarked tanker incident would not know of the dangers present if this product was contained in the tanker. Also this product is being used as fuel in numerous trucks so again it would not be known if a fire or explosion situation exists at the scene of an incident involving one of these vehicles.
Attached is a copy of a Fax received from the Victoria Police Traffic Support Groups concerning this product.
Could you please pass on this information to all brigades along with a warning to show upmost care when attending incidents involving diesel fuelled vehicles." (T documents, page 72, document A0562164/26)
Mr Brett Sidebottom said that he had never seen the document that was headed "Fuel Doctors Australia" and set out fuel analysis results. At the top of the document was written:
"Filtered once through 1 micron filters
Turned over through 5 micron filters
8.3% water oil
85.7% crude fuel
6.0% kerosene" (T documents, page 73, document A650464)
He did recognise the writing as either that of his father or brother.
Mr Brett Sidebottom said that he was not sure whether the document setting out purchases and sales in terms of litres and cost with reference to stock on hand in terms of book stock and actual stock (T documents, page 75, document A0562157/34) had been prepared by his father or brother. He did not provide the figures of a sale price of 61.31 cents and a purchase price of 51.52 cents. He did not keep those sorts of figures although his father and brother did so. As to the document setting out assumptions for cash flow budget between 1 October, 1996 and 30 September, 1997 (T documents, page 76, document A658122/11), he could not identify who had typed it but said that it could have been typed either by his father or by his brother. The document dated 14 October, 1996 and showing stock of distillate and solvent, the amounts owing and the stock on hand (T documents, page 78) was a document prepared by either his father or his brother. He had not provided them with the information it contained. Mr Brett Sidebottom did not recognise the writing in the letter written to Esanda and dated 22 November, 1996. His father does a lot of his bookwork and that letter was probably referable to his car loan. The writing on a letter dated 25 November, 1996 to the National Australia Bank and signed by Mr Kelvin Sidebottom (T documents, page 133, document A658121/431) was probably written by his father. It set out a summary of stock and funds. He could have dipped the tanks and told his father that there were 346,581 litres on hand on 25 November, 1996 as shown in that letter.
In his oral evidence, he said that he had a faint recollection of people coming to the depot to purchase solvent and paying cash for it. Those people collected the solvent and took it with them in their own trucks. He could recall being paid with both cash and cheques on those occasions, he said. Later, Mr Brett Sidebottom said that the greatest amount of cash he had ever received was $20,000. He had not written a receipt for that amount. The customer could have been Mick.
Mr Brett Sidebottom said that the diary entries for 15 January, 1997 (T documents, volume 3, document A650435) were partly written in his hand and partly in his father's. The documents at T10 and T11 of the T documents were not in his handwriting. The document at T10 is a despatch form dated 9 September, 1996 showing 30,000 litres of Certrex was sold for cash. T10 could have been written in his father's hand, Mr Brett Sidebottom said, but he did not recognise the signature. He could not recognise the signature on T11, which is an invoice on APS letterhead and dated 6 March, 1997. It shows that 47,649 litres of Logisol 20 were sold in a cash sale. The invoice was stamped with a disclaimer that the sale of the product was for use otherwise than as fuel in internal combustion engines. When Mr Brett Sidebottom received cash, he could not remember whether or not he had completed documents such as those at T10 or T11. He did not know whether he had normally completed such documents when he received cash. Mr Brett Sidebottom said that he had never previously seen a document headed "Cash Sales" and annexed to a letter dated 23 July.
Mr Brett Sidebottom could not recall filling out a cash sale docket but also said that he felt that he could vaguely recall one such cash sale but was unclear about the precise details. In his statement he said that:
"Quite often, sales of products (especially solvents) would be undertaken on 'cash basis' with payment being received at the time of sale. Most of these sales took place at the depot when product was collected from the depot." (Exhibit C, clause 8)
In his statement, Mr Brett Sidebottom said that, on numerous occasions, APS purchased petroleum products from suppliers and delivered them to customers without being delivered via APS's depot at Numurkah. On other occasions, those products would be delivered to the depot (Exhibit C). He said that there are 12 above ground tanks and 3 underground tanks at the depot. One of the above ground tanks is designed and used for LPG. The remaining above ground tanks were used for storing either solvent or diesel products. The particular tanks used depended upon the quantity to be stored. The capacity of the above ground tanks was 603,000 litres. No exact records were kept of the amounts of solvent or diesel held in each tank on a day to day basis. Mr Brett Sidebottom said in his statement that he was aware of the "rough amounts" held in each tank. At no time were different types of products stored in the same tank at the same time. The underground tanks were used exclusively for the storage of leaded and unleaded petrol.
Mr Brett Sidebottom said in cross-examination that the tanks were numbered but he was not sure whether a particular tank held a particular product. When told of what he had said in his statement, he said that his statement must be correct. He agreed that there were probably different types of solvent, heating oils and diesel. When asked how he ensured that he did not mix the products, Mr Brett Sidebottom said that, when a person is in the office and yard, he just gets to know the tanks and know not to mix. If he was not there, probably his father or brother told people what to do. They told them either verbally or in writing. Mr Brett Sidebottom said that he kept all of the information in his head and no record was kept to his recollection. Perhaps his father could have kept a record. While he agreed that it was a busy operation and he was not there 24 hours a day, he never had any problems. If he were not at the depot, he probably left instructions for others on a piece of paper as to the tank to be used. He had said "probably" as he could not recall back then and could not recall actually writing on a piece of paper. When asked whether his father and brother had assisted him in allocating tanks, he at first denied their assistance and then said that he could not remember.
Mr Brett Sidebottom said that he had never seen a document headed "Manifest (Australian Petroleum Supplies)" (T documents, page 171, document A993210/9). That document set out 15 tank numbers and, against each, showed information including the product name stored in each, and unit size. It showed 3 tanks with numbers pre-fixed with the letter "U". He said that the letter probably indicated that the tanks were underground tanks. Apart from one tank marked "LPG" for LPG storage, the remainder were pre-fixed with the letter "T" and shown as holding diesel. Mr Brett Sidebottom said that T7 was not accurately shown as holding diesel fuel as it was a water tank. He agreed that none of the tanks was set aside for solvent and had no explanation for that. As to why all the tanks were marked "diesel", he did not know.
In giving his evidence, Mr Brett Sidebottom said that, when petroleum products have been collected from Queensland they have been delivered in Dubbo and Sydney. Deliveries would be organised to any points north of Numurkah. In cross-examination, he said that he "vaguely" recalled having given that evidence. When asked whether he endeavoured to deliver product on the way if a customer was on the way, he replied that he was "not 100% sure". Whether he did so depended on where the delivery was and where the truck was. It was commonsense that he did so and saved money. He did not know whether he would have endeavoured to have product delivered in Sydney if it had picked up product in Bundall. Whether he would have done so depended on the location of the trucks and whether product was needed at the depot.
Mr Trevor Walker
Mr Walker, who is now the Manager, Policy and Legislation, Investigation (Excise) and was formerly a Chief Inspector – Investigation Branch in the Australian Customs Service ("ACS") gave both oral and written evidence. On 29 July, 1997, he executed warrants issued under s. 198 of the Act to search the premises of APS and GVLT and the residences of Mr Kelvin Sidebottom and Mr Raymond Sidebottom. He executed further warrants at the premises of APS and GVLT and the residence of Mr Raymond Sidebottom in August, 1997.
Mr Walker observed 15 tanks at the depot. Twelve tanks, he observed, were above ground and eleven of those were marked "diesel fuel". The remaining tank above ground was used to store liquid petroleum gas ("LPG"). There were a further three tanks below ground level and these were used to store super and unleaded petrol. Mr Walker said in his statement that, apart from some rough handwritten notes, his searches did not locate records showing the quantities of product kept in each tank or the quantities added or removed. He identified in his statement a number of other documents located during the searches. Mr Walker analysed the Depot Stock Balance and confirmed the accuracy of the information it contained by reference to other documents seized under warrant. (part of Exhibit 2)
Mr Gregory Meredith
Mr Meredith is a chartered accountant and a partner in the firm, Ferrier Hodgson. He was asked by the Collector to:
"Complete a reconciliation between the purchases and sales of petroleum products (excluding petrol) and the trucking logs for the period 16 July 1996 to 31 July 1997.
Undertake a reconciliation between the trading records and the banking records available, especially with reference to the purported cash sale delivery dockets and invoices." (Report dated 21 February, 2001, part of Exhibit 2)
Mr Meredith's understanding was that the Collector's case was based on two hypotheses: the blending hypothesis and the fictitious sales hypothesis. The basis of the former was that APS purchased both distillate and various solvents (and/or distillate supplied as solvent), blended the products and sold the combined product (and/or the distillate supplied as solvent) as distillate. He understood that, during the relevant period, solvents did not attract excise duty if they were to be used solely for purposes other than as fuel in internal combustion engines. By purchasing solvents with the appropriate disclaimer, APS could obtain them at a substantially discounted price. By then blending that solvent with distillate and selling the combined product as distillate, it could sell the combined product at a price significantly below that of its competitors. The basis of the fictitious sales hypothesis was that many invoices recording cash sales of solvent are fictitious and an attempt by APS to demonstrate that solvent it had purchased had not been blended with distillate and sold to customers.
Mr Meredith's methodology is set out in paragraph 6 of his report (part of Exhibit 2). He sought to verify the entries in the Depot Stock Balance for the period 16 July, 1996 to 13 January, 1997. A further stock log was recreated for the period following from 13 January, 1997 from supplier invoices, APS sales invoices and truck logs. Mr Meredith was given spreadsheets prepared by Customs and he confirmed the incoming movements of product with the supplier invoices detailing purchases of various petroleum products by APS. APS's invoices and dispatch dockets were checked against the merged spreadsheets to ensure all outgoing movements of product were recorded in the correct quantities. Mr Meredith then compared the sales and purchases with the trucking logs. He did so in order to establish what stock was transferred into the depot, what stock was delivered to customers direct from the supplier and what stock was delivered from the depot to the customers. Mr Meredith then documented the effect that those purchases and sales would have had on stock levels of distillate and solvents had there been no blending. Finally, assuming that the "Cash" sales of solvents in APS's records were fictitious and excluding those transactions from the analysis in Report – 6.3(e)) (see paragraph 42 above) as well as assuming that APS was engaged in blending, Mr Meredith analysed a hypothetical running balance of stock holdings to determine whether those assumptions could be supported.
Mr Meredith referred to a report and valuation of the property at Numurkah occupied by APS and its depot in which the fuel storage capacity of the depot is identified as:
Not Known Super Petrol Unleaded Petrol Distillate
Below Ground Tanks 2 x 14,000 litre 1 x 28,000 litre 3 x 55,000 litre Above Ground Tanks 1 x 1000,000 litre 165,000 28,000 28,000 100,000 45,000 495,000
Total Litres Storage Capacity 165,000 28,000 28,000 640,000
(document A442272) (part of Exhibit 2)
Based on this document, Mr Meredith concluded that the minimum amount of storage for distillate and/or solvent was 640,000 litres. If the 3 tanks identified as "new tanks" were included, the minimum capacity would be 805,000 litres. In addition, there had to be taken into account the trucks used to carry petroleum products. These trucks he identified from the trucking logs and concluded that they had a total carrying capacity of 320,000 litres.
In preparing his report, Mr Meredith assumed that the supplier invoices held by Customs represented all of the purchases of petroleum products by APS other than leaded and unleaded petrol. As to deliveries, Mr Meredith assumed that the invoice books and dispatch books seized under the warrants detailed all deliveries of product by APS during the relevant period. Unless the trucking records showed a vehicle driven by "Mick", "own" or "?", he assumed that all the logs recorded movement of product to and from the depot of APS and from suppliers direct to customers. Those notations, he assumed, represented collection of the product by the customers' own subcontractors or trucks.
The Depot Stock Balance, Mr Meredith ascertained, showed bowser sales of 781,714 litres for the period 16 July, 1996 to 13 January, 1997. There were no records relating to sales after that period. As a consequence, Mr Meredith did not allow for bowser sales on and after 14 January, 1997.
Where stock movements were identified in the trucking logs but not reflected in any APS or supplier invoice, Mr Meredith regarded the product as petrol rather than solvent or distillate. He made that assumption for the period covered by the Depot Stock Balance as they had been omitted. In relation to the subsequent period, he made that assumption as those who bought or sold the product matched those identified as petrol movements in the period covered by the Depot Stock Balance.
Taking these assumptions into account and excluding leaded and unleaded petrol, Mr Meredith concluded that APS purchased 13.24 million litres between 16 July, 1996 and 29 July, 1997 and sold 32.95 million litres. He based this conclusion on a spreadsheet reflecting all purchases and sales of those petroleum products. Those sales included invoices noted as cash sales but not otherwise identified. That spreadsheet is reflected in a graph showing the stocks of solvent remaining relatively constant over the period and the stocks of distillate dropping to a negative level of almost 20,000,000 litres.
Mr Meredith prepared a graph excluding the cash sales of solvent as well as the sales of leaded and unleaded petrol. Between 16 July, 1996 and 29 July, 1997, the combined stock level remained relatively constant while the levels of solvent rose by a little over 20,000,000 litres and the levels of diesel were almost minus 20,000,000 litres.
An analysis of the depot tank capacity indicated to Mr Meredith that a total litres storage capacity for distillate and solvent of between 640,000 litres and 805,000 litres and the total capacity of the GVLT's 7 tanker trucks for the period July to October 1996 was approximately 320,000 litres. Based upon these assumptions, he estimated that the depot's distillate/solvent storage capacity to be in the vicinity of 1,000,000 litres.
Linking stock movement with the depot's capacity, Mr Meredith prepared a graph for the period 16 July, 1996 to 29 July, 1997. Up to 13 January, 1997, which is the end of the period covered by the Depot Stock Balance, he concluded that the combined stock balance remains within the storage capacity of the depot. After the end of that period, he concluded that it exceeded that storage capacity, which he regarded as in the order of 1,000,000 litres. Mr Meredith explained this discrepancy on the basis that bowser sales of distillate had not been included in the documents and he was unable to identify those sales after 13 January, 1997. When he assumed that the bowser sales after 13 January, 1997 reflected the same pattern of bowser sales as before, his plotting of the combined stock levels revealed that the combined stock levels of the depot stayed within the capacity of APS's depot.
From his analysis of the records of purchases, sales, stock movements and stock balances against these hypotheses Mr Meredith drew the following conclusions:
"a) APS did not purchase enough distillate (13.24 million litres) over the period to be able to supply the volume of distillate sold (32.95 million litres) to APS' customers.
b)If the assumption is made that APS' blended distillate with solvent (and/or purchased distillate as solvent and sold it as distillate), total purchases (36.8 million litres) were enough to supply the total volume of blended distillate and solvent sold (36.5 million litres) to APS' customers over the whole period 16 July 1996 to 31 July 1997.
c)The volume analysis in Annexure 7 as depicted in Figure 4 remains within the available capacity of the depot and the trucks in use. Accordingly, this provides a strong inference that the Blending hypothesis and the Fictitious Sales hypothesis as set out in Section 5 of my report are correct.
d)That b) and c) above suggest that the "Cash" sales did not exist and were falsely created by APS to show that solvent purchased was not being blended with distillate by APS for sale to customers. Further, my review of the physical invoices that support the 'Cash' sales suggests that the invoices that support the "Cash" sales suggests that the invoices do not conform with the details and form that I would expect them to exhibit if the invoices were used as source documents for the preparation of financial statements and tax returns for APS." (Report dated 21 February, 2001, part of Exhibit 2)
Mr Neil Holland
Mr Neil Holland is a consultant forensic scientist. He has prepared two reports, dated 7 August, 1998 (Exhibit 2) and 29 August, 2001 (Exhibit 9), concerning the author of the handwriting appearing on certain documents. Where relevant, his evidence is noted in relation to the document concerned in the body of these reasons.
Mr Peter Anderson
Mr Peter Anderson is the Transport Manager of the Shell Company of Australia ("Shell"). He set out the general criteria that a distributor of petroleum products must meet in order to make a profit:
"the margin between the price at which it purchases product and the price at which product is sold needs to be sufficiently wide to cover all business operational and overheads costs as well as the profit made on the sale;
·distributors are concerned to coordinate the collection, storage and delivery of product to ensure that those activities are carried out in the most economic fashion and that overheads are kept as low as possible; and
·therefore they are concerned to keep the mileage of tankers undertaking collection and delivery of product to a minimum.
For example, if a product is ultimately to be delivered to a customer direct from the collection point, there would be no need to bring that product to the distributor's depot, which would give rise to storage costs, if those costs and costs associated with mileage and transport time could be saved by delivering it direct." (Statement, paragraph 5, part of Exhibit 2)
With regard to record keeping, Mr Anderson stated:
"9. In my opinion, the proper and normal practice is for detailed records to be kept of the quantities of each particular product held in each tank including the movements of product into and out of these tanks. These records can be kept manually or on a data base. For example, Shell's recording of product storage records at its Newport depot are all computerised, so by going into its database at any given time it is possible to tell what is then in any tank at the depot. By contrast, at the Darwin depot where I previously worked, manual records were kept of the quantities of product in each tank as tank storage recording is not automated. In both cases this is eventually linked into a central storage system.
10.I would regard it as most unusual if there were no records relating to the contents of individual tanks at a distributor's depot. Record keeping is used – and is most important – for a number of reasons, especially the following:-
(a)in order to enable the balancing of stock movements;
(b)in order for calculations to be made of customs or excise duty which may be payable;
(c)for the purpose of tracing the movement of product to customers;
(d)for security, safety or environmental purposes, in order to identify any product loss, tank leakage, theft of product etc.
It is therefore of enormous importance for any distributor of petroleum products to keep detailed and comprehensive records of products kept in individual tanks." (part of Exhibit 2)
Mr Anderson estimated that the cost of transporting petroleum products from Queensland to Numurkah at the relevant times was approximately 3.95 cents per litre. He calculated that figure taking into account fixed costs per hour and variable costs per kilometre, average travel speed and load size. Given this cost, he formed the view that diesel fuel could not have been purchased for 58 cents per litre in Brisbane in 1996/1997 and sold in a range between 61 and 61.5 cents per litre. The selling price could not have accommodated the transport costs of the fuel he said.
CONSIDERATION
Legislative framework
At the time the Collector made his decision, the Act was administered by the CEO and a Collector is taken to be the CEO, the Regional Director for a State or Territory or any officer doing duty in the matter in relation to which the expression is used (s. 4(1) and see also Customs Act 1901 ("Customs Act"), s. 8). Since then, with effect from 5 May, 2001, the Act has been amended by the Taxation Laws Amendment (Excise Arrangements) Act 2001 ("Amendment Act") and the effect of those amendments is that the Act is now administered by the Commissioner of Taxation, who is taken to have done anything previously done under the Act by the CEO in his capacity as CEO (Amendment Act, ss. 4 and 5). A reference in the Act to the CEO is now a reference to the Commissioner of Taxation and a Collector is, in the context of this case, the Commissioner of Taxation (Amendment Act, ss. 4 and 6). A person who was an "officer of Customs" for the purposes of the Act is now taken to be an officer employed under the Public Service Act 1999 who is exercising powers or performing functions pursuant to, or in relation to, a taxation law (Amendment Act, ss. 12 and 13). The remaining provisions of the Act have been amended by the Amendment Act to take account of the change in administration. For the purposes of this case, however, the changes effected by the Amendment Act are not relevant for we must consider the legislation at the time that the demand was made of each of the applicants.
Under the Act, the manufacturer of excisable goods is required to pay to the Collector the excise duty on those goods (s.54(1)). So too is the owner of excisable goods where that owner enters the goods for home consumption (s. 54(1)). "Excisable goods" include goods in respect of which excise duty is imposed by Parliament (s. 4(1)).
In so far as goods are concerned, a person is not permitted to manufacture excisable goods unless he or she does so pursuant to the Act and has a licence granted under it (s. 35). A licence to manufacture may be granted by the Collector and may be a licence to manufacture without limitation or subject to specified limitations (s. 34). A manufacturer must not manufacture excisable goods at any place other than the factory specified in the licence and must not manufacture more than the quantity permitted by his or her licence (s. 45). Furthermore, unless permission is given, the manufacturer is not allowed by his licence to sell the excisable goods at his or her factory or at any place within 45 metres of that factory (s. 45).
At all relevant times, officers of Customs have the right to supervise the manufacture of excisable goods. They were given that right for the protection of the revenue. This is the effect of s. 46 of the Act. Both a manufacturer, and a proprietor of an approved place, are required to keep records and to retain them for any period the CEO directs and to produce them on demand to any officer (ss. 50(1)). They are also required to give the CEO such returns as he directs (s. 50(1)(a)). Section 50 provides that any officer may inspect and take copies of, or extracts from, any records kept pursuant to s. 50(1).
Every manufacturer is required to provide sufficient lights, correct weights and measures and scales and all labour necessary for weighing material received into, and all excisable goods manufactured in the factory, and for taking stock of all material and excisable goods contained in the factory (s. 52). Section 53 provides that:
"Every manufacturer is responsible for the safe custody of all proclaimed material and excisable goods in his factory and for the observance of this Act within his factory."
A "manufacturer" means a person who is licensed under the Act to manufacture excisable goods (s. 4(1)). In so far as it is relevant, the word "manufacture":
"… includes all processes in the manufacture of excisable goods …" (s. 4(1))
Part VIIB of the Act makes special provisions relating to blended petroleum products. Section 77H provides that:
"(1) For greater certainty so far as concerns the application of the provisions of this Act, petroleum blending to produce an excisable blended petroleum product is taken to constitute the manufacture of that excisable blended petroleum product.
(2) Subsection (1) does not imply that, in the absence of such a provision, the blending of substances (whether petroleum products or not) would not constitute the manufacture of the substance produced by blending."
The expression "excisable blended petroleum product" means "a blended petroleum product that is not an exempt blended petroleum product" (s. 77G). There is no suggestion in this case that the goods in issue are "an exempt blended petroleum product". A "blended petroleum product" means:
"… the product of the blending of a petroleum product (including a petroleum product that is itself a blended petroleum product) with another substance or other substances, whether that other substance or those other substances are petroleum products or not." (s. 77G)
In summary, a "petroleum product" means any excisable goods or any imported goods that either are, or would be if produced in Australia, classified as items of the Schedule to the Excise Tariff Act 1921 ("Tariff Act") specified in s. 77G of the Act.
Of relevance in this case is Item 12 of the Tariff Act. That item refers to an "excisable blended petroleum product". That prescribed by law is free of excise duty while the rate of duty described as "Other" is the amount of duty worked out in accordance with s. 6G. That section provides that the amount is worked out using the formula "[Volume x Blending rate] – Previously paid duties". "Volume" means the volume of excisable blended petroleum product. The "Blending rate" is determined by reference to whether the excisable blended petroleum product includes goods classified to paragraphs 11(A)(3) or 11(C)(2). "Previously paid duties" means "… the sum of excise duties (if any) already paid on products, included in the excisable blended petroleum product under Items 2, 11 and 12 of the Schedule worked out in accordance with subsection (4)". In working out the excise duties that are paid under Items 2, 11 and 12, the excise duties paid under Item 12 on that other blended product and any excise duties paid under Items 2 or 11 on its constituent elements are both taken into account.
While the Tariff Act does not define the expression, "excisable blended petroleum product", s. 2 of that legislation requires that it, together with other specified legislation, be read as one with the Act. In view of that, the definition of "excisable blended product" in the Act applies to the expression as it is used in the Tariff Act. In so far as an excisable blended petroleum product is concerned, Item 12 provides that the duty payable is the amount of duty worked out in accordance with s. 6G of the Tariff Act. Section 6G(1)(b) provides that the entire volume of the blend be dutiable at the rate provided in paragraph 11(E)(2) of the Schedule to the Tariff Act. The amount calculated to be payable is reduced by the amount of "previously paid duties", which is defined as the sum of any excise duties already paid on products included in the excisable blended petroleum product under Items 2, 11 and 12 of the Schedule worked out in accordance with s. 6G(4) (s. 6G(1)). Section 6G(4) is concerned with the situation in which an excisable blended petroleum product is included in the excisable blended petroleum product under consideration. Where excise duties have been paid under Item 12 on that included excisable blended petroleum product and, under Items 2 or 11 on its constituent elements, they are to be taken into account for the purpose of working out excise duties that are paid under Items 2, 11 and 12 of the Schedule.
Possession and control of excisable goods is strictly controlled. Section 117(1) of the Act provides that:
"No person other than a manufacturer shall, except by authority, have in his possession custody or control any manufactured or partly manufactured goods upon which Excise duty has not been paid, and no person other than a manufacturer, producer, or dealer shall except by authority keep or store any proclaimed material."
Section 119(1) provides that:
"A person shall not unlawfully convey any excisable goods upon which excise duty has not been paid and the person in charge of a ship, boat or aircraft shall not use the ship, boat or aircraft, or knowingly suffer the ship, boat or aircraft to be used, in the unlawful conveyance of such goods."
It is an offence to evade payment of any duty which is payable (s. 120(1)(iv)). Where the Court can determine the amount of the duty that would have been payable on the goods to which an offence relates if those goods had been entered for home consumption, the penalty applicable to the offence is a fine not exceeding 5 times the amount of that duty and not less than 2 times that amount or, where the Court cannot determine the amount of that duty, a fine not exceeding $50,000 (s. 129).
All excisable goods are subject to the control of Customs until they are either delivered for home consumption or for exportation to a place outside Australia (s. 61). In Goben Pty Ltd v Chief Executive Officer of Customs (1997) 149 ALR 102, the expression "control of Customs" as used in s. 33 of the Customs Act "… refers to and comprehends the totality of the rights which the Customs Act confers upon Customs" (page 105). While they are subject to that control, those goods must not be moved, altered or interfered with except as authorised by the Act (s. 61). A Collector may give a person written permission to remove goods that are subject to control from one place to another or to deliver certain goods for home consumption without entry (ss. 61A and 61C). While excisable goods are subject to the control of Customs, the effect of s. 60 is to impose certain obligations upon those who have their possession, custody or control. In the context of this case, s. 60(1) is relevant. It provides:
"Where a person (including a manufacturer) who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the control of Customs:
(a)fails to keep those goods safely; or
(b)when so requested by a Collector, does not account for those goods to the satisfaction of a Collector;
the person shall, on demand in writing made by a Collector, pay to the Commonwealth an amount equal to the amount of the Excise duty which would have been payable on those goods if they had been entered for home consumption of the day on which the Collector made the demand."
An amount payable under s. 60(1) is a debt due to the Commonwealth (s. 60(2)). It may be sued for and recovered in a court of competent jurisdiction by proceedings in the name of the Collector.
Where a Collector has made such a demand under s. 160, s. 162C(1)(e) permits an application for review to be made to this Tribunal. The scope of the review is limited to whether or not the decision to make the demand was the correct or preferable decision. It does not extend to a consideration of whether the amount demanded may be recovered from all or any of the applicants. (F.H. Faulding and Co. Limited and Collector of Customs, No. G50 of 1990, 23 August, 1991,
O'Loughlin J at paragraph 4)
Burden of proof
Mr Murphy submitted that the Collector must establish that three conditions are satisfied before he may make a demand. Those conditions are that the applicants have, or have been entrusted with, possession, custody or control of the goods, the goods were excisable goods and the goods were subject to the control of customs. It is not enough that the Collector simply aver to the facts that he alleges. That is enough when the CEO institutes proceedings to recover penalties or for the condemnation of goods seized as forfeited (i.e. "excise prosecutions"; s. 133) for s. 144(1) of the Act provides that, in any excise prosecution, the averment of the prosecutor or plaintiff in the information, complaint, declaration or claim shall be prima facie evidence of the matter or matters averred. Rather, Mr Murphy submitted, the Collector must establish that all of the pre-conditions were present before he made the demand. He relied upon the following passage from the judgement of Finkelstein J in Sidebottom v Giuliano:
"If the requests for an accounting are not declared to be invalid and the applicants do not satisfactorily account for the goods, Mr Giuliano is entitled to demand payment of the excise alleged to be due in respect of the blended petroleum products and if that amount is not paid he may commence proceedings to recover that sum as a debt due in a court of competent jurisdiction: s 60(2). To succeed in the action it will be necessary for the Collector to establish that each applicant had possession, custody or control of excisable goods which were subject to the control of Customs. It will also be necessary for the Collector to prove either that each applicant had failed to safely keep those goods or alternatively that each applicant had failed to satisfactorily account for them. Sections 60(1)(a) and (b) are not cumulative but are alternative provisions." (page 581)
It was illogical, Mr Murphy submitted, if an amount would not be recoverable under s. 60(2) if the conditions were not satisfied but a demand would be valid.
Our consideration of Mr Murphy's submission requires us to consider ss. 60(1) and (2) of the Act. When we do that, we come to the conclusion that, although s. 60(2) requires proof of each of the criteria set out in s. 60(1), they are dealing with separate matters. Section 60(2) is concerned with a recovery action in a court. Section 60(1) is concerned with a different matter. It is concerned with the making of a demand. That is a step that necessarily precedes recovery action under s. 60(2), if that action is to be instituted, but it is a step that can be taken even if recovery action is never instituted.
The two steps are consistent with those that may be taken in recovering any debt. A person who claims that he or she is owed a debt may make a demand and is not required to prove the debt at that stage. Proof is only required if debt recovery is taken in a court. Viewed in this way, it is not illogical if it were the case that s. 60(1) places a burden of proof on the Collector but s. 60(1) does not.
We have reached the same view when we move from the matters with which s. 60(1) and s. 60(2) are concerned to a closer analysis of the language of those provisions. The decision to make a demand is an administrative decision reviewable by an administrative tribunal required to review it on its merits. In view of that, we have had regard to the general principles regarding the powers of administrative tribunals and whether any party bears an onus of proof (McDonald v Director-General of Social Security (1984) 6 ALD 6, Woodward, Northrop and Jenkinson JJ). Woodward J made the following general comments upon the matter when he said:
" The first point to be made is that the onus (or burden) of proof is a common law concept, developed with some difficulty over many years, to provide answers to certain practical problems of litigation between parties in a court of law. One of the chief difficulties of the concept has been the necessity to distinguish between its so-called 'legal' and 'evidential' aspects. The concept is concerned with matters such as the order of presentation of evidence and the decision a court should give when it is left in a state of uncertainty by the evidence on a particular issue.
The use outside courts of law of the legal rules governing this part of the law of evidence should be approached with great caution. This is particularly true of an administrative tribunal which, by its statute 'is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate' (AAT Act s 33(1)(c)).
Such a tribunal will still have to determine practical problems such as the sequence of receiving evidence and what to do if it is unable to reach a clear conclusion on an issue, but it is more likely to find the answer to such questions in the statutes under which it is operating, or in considerations of natural justice or common sense, than in the technical rules relating to onus of
proof developed by the courts. However these may be of assistance
in some cases where the legislation is silent." (page 9)
Jenkinson J, focused upon the difference between proceedings between a court and those in an administrative tribunal when he said:
"... the administrative decision-maker will commonly inform himself of the facts by his own inquiries, as well as receiving such proofs as the individual citizen and those who may be authorised to oppose the citizen's interest choose to place before him. And he will not ordinarily be free, as a court is ordinarily free, to determine a matter against the party on whom lies the onus of proof, and who fails to offer any proof in discharge of the onus, without further inquiry. When the party to litigation on whom the onus of proof of an issue lies has concluded his evidence, the court may be called upon by the other party to determine the question of law whether that evidence can support a
verdict or finding for him on whom the onus lies. Except by special legislative direction no administrative decision-maker could be so constrained. In many cases subject to administrative decision there is in any event no other party in controversy with him on whom the onus may be said to lie." (page 21)Woodward J went on to consider whether there was an evidential onus on the Director-General to satisfy himself that there had been a change of
circumstances before cancelling Mrs McDonald's invalid pension. In doing so, he said:" The provisions of the Social Security Act 1947 under which the Director-General could have reviewed the applicant's pension in the present case are ss 14 and 46(1). Section 14 reads:
'Whenever it appears to the Director-General that sufficient reason exists for reviewing a determination, direction, decision or approval of an officer under this Act (including a determination, direction, decision or approval of the Director-General), the Director-General may review the determination, direction, decision or approval and may affirm, vary or annul it.'
Section 46(1) reads:'If,
(a) having regard to the income of a pensioner;
(b) by reason of the failure of a pensioner to comply with section 44 or 45; or
(c) for any other reason,
the Director-General considers that the pension which is being paid to a pensioner should be cancelled or suspended ... the Director-General may cancel or suspend the pension ... accordingly.'
Whichever provision the Director-General chooses to act under, (and in this case, although it is not entirely clear, he seems to have purported to act under s 46(1), if he is of the opinion that a person is not, or is no longer, permanently incapacitated, he has both a right and a duty to terminate that person's pension. In doing so he must act in good faith on the information available to him, but no question of onus arises.In my view, the answer is the same when the AAT seeks to put itself in the position of the Director-General. It must act on the material which is before it but, as I have already pointed out, it is not bound by rules of evidence and may inform itself on any matter in such manner as it thinks appropriate. It is true that facts may be peculiarly within the knowledge of a party to an issue, and a failure by that party to produce evidence as to those facts may lead to an unfavourable inference being drawn - but it is not helpful to categorize this common sense approach to evidence as an example of an evidential onus of proof.
The same may be said of a case where a good deal of evidence pointing in one direction is before the Tribunal, and any intelligent observer could see that unless contrary material comes to light that is the way the decision is likely to go. Putting such cases to one side there can be no evidential onus of proof in proceedings before the AAT unless the relevant legislation provides for it, and in the present case the Social Security Act 1947 (Cth) does not." (pages 10-11)McDonald's case has been considered in a number of cases in the Federal Court relating to jurisdictions other than social security with which it was concerned. A number, such as Australian Postal Commission v Burgazoff (1989) 10 AAR 296; Elleissy v Australian Telecommunications Commission (unreported, Federal Court, Hill J, No G836 of 1988, 14 July 1989); Barker v Australian Telecommunications Commission (1990) 95 ALR 72; Casarotto v Australian Postal Commission (1989) 10 AAR 191; (Hill J) and Commonwealth v Muratore (1978) 141 CLR 296 (Gibbs, Stephen, Jacobs, Murphy and Aickin JJ) have considered and applied its principles in relation to the compensation jurisdiction. It has also been followed in other jurisdictions as, for example, when it was followed by the Federal Court in Swan Television and Radio Broadcasters Ltd v Australian Broadcasting Tribunal (1985) 8 FCR 291, Sweeney, Toohey Wilcox JJ) in considering s. 19(2) of the Broadcasting and Television Act 1942 (Cth). That subsection provided that the Australian Broadcasting Tribunal could make certain directions where it was "satisfied that, by reason of the confidential nature of any evidence or matter or for any other reason, it is desirable that the Tribunal should" give such directions. The Full Court said (at 297):
There is no evidence of any written agreement signed for or on behalf of any of them but a written agreement is not essential to there being a lease or a licence. They may be implied from the persons' conduct or from other material. In this case, there are five pieces of evidence which are relevant. The first is the evidence of Mrs Sidebottom that APS pays $4,387 to RPM as rent. Precisely what that rent was to be paid for is unclear. That is to say, whether it was rent for the lease or use of the tanks or rent for a portion of the land was not clear. The second is the diary note stating that there is a contract between APS and RPM to rent storage tanks and dispensing equipment for petroleum products. There is no mention of the land in that note. The note is also somewhat ambiguous in that it is not clear whether RPM is intended to have some role in storing the petroleum products for APS customers or whether APS is to rent the storage tanks to store them before it delivered them to its own customers. The third piece of evidence is the evidence of Mrs Sidebottom that APS occupies all but the western end of the land owned by RPM. Her evidence is consistent with the general evidence of Mr Brett Sidebottom when describing APS's use of the land. The fourth is found in the balance sheets for APS for the year ending 30 June, 1997. That document shows the cost of plant and equipment including fuel tanks and their installation. This must be read with the diary note of 20 January, 1995 (see paragraph 18 above). The physical properties of the tanks comprised the fifth piece of evidence. That evidence is that the tanks are either underground or surrounded by bricks approximately a metre high where they are above ground. Mrs Sidebottom thought that they were fixed to the ground in some way.
The evidence is somewhat confused. The diary note could be read as suggesting that RPM is renting storage tanks from APS. That interpretation, however, is contrary to the profit and loss account for RPM for the year ending 30 June, 1997, which does not show any figure for outgoing rental. While the account relates to a different financial year, there is no reason to think that the financial arrangements between RPM and APS varied between the two years. The diary note could also be read as suggesting that APS is renting the storage tanks from RPM and that APS will use them to store fuel for its own customers. That interpretation accords with the financial accounts of both APS and RPM. A further interpretation is that APS will rent the tanks and that RPM will store the fuel until collected by APS's customers. That interpretation is also consistent with the financial accounts.
Whether the tanks are fixtures to the land or retain their character as personal property is of no consequence. If the tanks are fixtures and were installed by APS, they are removable by APS (Landlord and Tenant Act 1958 (Vic), s. 28(2)). Although the evidence is confused, we consider that the diary note and the financial account have a common thread. That thread is that RPM permitted APS to use its land for the purpose of storing fuel regardless of whether RPM or APS owned the tanks in which that fuel was stored. We make that finding. There is no specified time period for which that use is permitted but it could be inferred from the monthly payment of rent that it is permitted to use them on a monthly or periodic basis.
Use for a period, whether an expressly nominated period or not, does not mean that there is a lease by RPM to APS for it may be that there is simply a licence to use the property rather than to lease it. Before there can be a lease agreement, it must be found that APS has exclusive possession, subject only to RPM's right to repair if the lease is of real property or that APS has the right to quiet enjoyment of the tanks if those tanks are personal property owned by RPM.
Those who could be expected to know about the actual arrangements that were made between APS and RPM are Mr Kelvin Sidebottom and Mr Raymond Sidebottom. At the time that the diary note was written on 20 January, 1995, for example, Mr Kelvin Sidebottom was a director of both RPM and APS. We would expect him to be well placed to know of the arrangements made between the two companies. Although Mr Raymond Sidebottom did not become a director of APS and RPM until later in 1995, we find on the basis of Mrs Sidebottom's evidence that he has been closely involved in the business as has his father. They were the "guiding hands" as it were of APS, RPM and GVLT. We would expect him to be well placed to know what the arrangements between the two companies were as to the use of the tanks. Mrs Sidebottom has been a director since 1995 but we find that she did not know what went on in the business of any company of which she was a director. She performed her functions as a book keeper but, we find, was given only a very limited role in the day to day operations of any of the companies of which she was a director.
Despite their roles in APS and RPM, neither Mr Kelvin Sidebottom nor Mr Raymond Sidebottom was called to give evidence. That was so despite our querying whether it would be appropriate to do so. We considered whether we should exercise our powers under s. 33 of the AAT Act to summons them to give evidence but decided against it. While it is clearly our function to review the decision to reach the correct or preferable decision (Drake v Minister for Immigration and Ethnic (1979) 24 ALR 577, per Bowen CJ and Deane J at page 589), it is not our function to seek out all relevant evidence on all occasions. We may have regard to the capacity of the parties to produce evidence and to consider the consequences if we do not use our powers. It is impossible to set down guidelines as to when the power should be used. We have, however, concluded that it is not appropriate to use it in the circumstances of this case. The applicants are engaged in business, could be expected to have matters upon which we would seek further evidence within their own knowledge, are legally represented, have been put on notice that we consider the evidence is lacking and that one of the reasons it is lacking is due, in part, to their absence and can be expected to have been advised about the possible consequences of their choosing not to give evidence. One of those consequences is set out in the judgement of Mason CJ, Deane and Dawson JJ in Weissensteiner v The Queen (1993) 178 CLR 217:
"We have quoted rather more extensively from the cases than would otherwise be necessary in order to show that it has never really been doubted that when a party to litigation fails to accept an opportunity to place before the court evidence of facts within his or her knowledge which, if they exist at all, would explain or contradict the evidence against that party, the court may more readily accept that evidence. It is not just because uncontradicted evidence is easier or safer to accept than contradicted evidence. That is almost a truism. It is because doubts about the reliability of witnesses or about the inferences to be drawn from the evidence may be more readily discounted in the absence of contradictory evidence from a party who might be expected to give or call it. In particular, in a criminal trial, hypotheses consistent with innocence may cease to be rational or reasonable in the absence of evidence to support them when that evidence, if it exists at all, must be within the knowledge of the accused." (pages 227-228)
Given the unsatisfactory state of the evidence, we have concluded that there was no lease agreement between RPM and APS regarding the land or the tanks. On the basis of the evidence, all that we have concluded is that there was an agreement that APS would be permitted by RPM to use its land and be permitted either to install fuel tanks or, if the tanks were owned by RPM, to use those tanks. We do not find that there was an agreement that APS would have possession of the tanks to the exclusion of RPM as there is nothing in the evidence to support that finding.
As to possession of the petroleum products in the tanks, we find that dealing in such products was the business of APS and not of RPM. As the owner of the land on which the petroleum products were kept but not the owner of the petroleum products themselves, RPM had possessory rights in relation to all but the owner of those products (i.e. APS).
In addition to its possessory rights, RPM also had custody of the petroleum products. It did so by virtue of its giving APS permission to use its land for the purpose of storing petroleum products by virtue of its not having given APS exclusive possession of those tanks. RPM, therefore, continued to have access to and charge of the tanks, and therefore of their contents, subject only to the licence it had given to APS to use those tanks. Whether it actually used that access or exercised control of the tanks and their contents seems to us not to be relevant. Against the background of a section (s. 60(1)) that is directed to keeping excisable goods safely in order to protect the revenue, it seems to us that its right to have such access and charge meant that it had custody of the tanks and of their contents within the meaning of the word "custody" as it is used in s. 60(1).
Turning to APS, we find that it owned the petroleum products stored in the tanks on RPM's property. That was not in dispute and, in any event, there is no evidence to suggest otherwise. We find also that it was in possession of the petroleum products which it stored in RPM's tanks. It had physical custody of the petroleum products and controlled them by directing their purchase, sale and delivery. On the same basis, we find also that APS had control of the petroleum products.
Mr Brett Sidebottom was not clear as to the role he played in handling APS's petroleum products but he was clear that GVLT made deliveries for APS either by using its own prime movers and tankers or by using sub-contractors. That accords with Mrs Sidebottom's evidence. In view of that, we find that to be the case. On the basis of Mr Brett Sidebottom's evidence, we find that he acted largely at the direction of either Mr Kelvin Sidebottom or of Mr Raymond Sidebottom.
It follows that GVLT had two roles. In the first role, it had possession and custody of the petroleum products once loaded on its own tankers. It also had a wider role in directing the movement of the petroleum products from the tanks to either its own tankers or to those of its sub-contractors even if its directions were subject to the direction of another. That is to say, within the ambit of the direction given to GVLT through Mr Brett Sidebottom and ultimately by Mr Kelvin Sidebottom and Mr Raymond Sidebottom, GVLT had control of the petroleum products in the tanks of the sub-contractors.
The Collector's request dated 16 March, 1999 refers to the period between 1 July, 1996 and 31 July, 1997. In this period, both Mr Kelvin Sidebottom and Mr Raymond Sidebottom were directors of APS, RPM and GVLT. By virtue of s. 198A of the Corporations Law and in the absence of any modification effected by virtue of s. 135, the business of each of the companies is managed by or under the direction of its directors, two of whom were Mr Kelvin Sidebottom and Mr Raymond Sidebottom. We find that Mr Kelvin Sidebottom and Mr Raymond Sidebottom made all the principal decisions affecting the operations of APS, RPM and GVLT. Those decisions included decisions regarding the sale and purchase of petroleum products, the maintenance of records about their stocks of those products and the transport of those products. Their actions in relation to the petroleum products which were bought and sold as part of APS's business and transported as part of GVLT's business were undertaken on behalf of those companies. In Goben Pty Ltd v Chief Executive Officer of Customs, Davies J found that that owner of the warehouse was the agent of the owner of the goods and so had possession, custody or control of those goods. Applying that analogy to this case, Mr Kelvin Sidebottom and Mr Raymond Sidebottom, who act on behalf of APS, RPM and GVLT, will have possession, custody or control to the extent that we have found APS, RPM and GVLT had possession, custody or control.
We note that s. 60(1) does not simply refer to those persons who had possession, custody or control but to those who were "entrusted" with it. No arguments were addressed to that issue. In its ordinary meaning, to "entrust" a person with something is to "… Invest with a trust; give (a person etc.) the responsibility for a task, a valuable object, etc …" (The New Shorter Oxford English Dictionary, 3rd edition, 1993). The word "entrusted" was considered by the High Court in Stephens v R (1978) 21 ALR 680 (Barwick CJ, Gibbs, Stephen, Jacobs and Murphy JJ) in the context of whether Mr Smith had been entrusted with property and had fraudulently converted it to his own use. Barwick CJ, with whom Stephen J concurred, considered that, in order to constitute entrustment in the context of the offence, there must be a mutual intention between the payer and the payee of money that the money would remain the property of the payer or the person for whom it was received until it is due to be repaid or until it is applied for the specific purpose for which it was paid. Gibbs J, with whom Jacobs and Murphy JJ concurred, adopted a more general meaning of entrustment:
"… One of the ordinary meanings of the word 'entrust' is to 'confide the care or disposal of' (see Shorter Oxford English Dictionary) and it is in that sense that the word is used in the section. To bring the case within the section the property must have been entrusted to the accused either for safe-keeping or to be applied, paid or delivered for a particular purpose or to a particular person. In other words it must have been earmarked for certain purposes which are not purposes of the accused himself (see Smith and Hogan: Criminal Law 1st ed, p 433; Weinberg and Williams, op cit, p 191). It is necessary to consider the terms on which the property was received. …" (page 695)
Applying the ordinary meaning of "entrust" to s. 60(1), it seems to us that the notion of ownership of the excisable goods is not a relevant consideration. That arises from the purpose of s. 60, which is to ensure that goods do not find their way into home consumption without payment of duty. It does that by imposing an obligation upon a person in possession, custody or control of excisable goods to ensure that they do not do so. To impose any notion of ownership in that context would be to run counter to the object of the section. By the same token, it would not be consistent with the object to impose an obligation upon those who may have possession, custody or control of excisable goods but who have not been given that possession, custody or control for safe keeping or for a particular purpose i.e. those who have not been entrusted with that possession, custody or control. In this case, GVLT, Mr Kelvin Sidebottom and Mr Raymond Sidebottom have been entrusted with possession, custody or control by virtue either of the agreement between GVLT and APS or in the case of Mr Kelvin Sidebottom and Mr Raymond Sidebottom because they are directors of APS. In the case of APS, it is the owner of the petroleum products and has entrusted itself, as it were. RPM is in the same position in the sense that it is the owner of the tanks and has been entrusted through the arrangements it has made with APS.
Have the applicants, or any of them, failed to keep the goods safely or not accounted for them to the satisfaction of a Collector?
We have already touched upon this in setting out Finkelstein J's judgement in Sidebottom v Guiliano (see paragraph 13 above). What is meant by the expression "failing to keep the goods safely" in s. 60(1)(a) had earlier been considered by the High Court in Collector of Customs (NSW) v Southern Shipping Co. Ltd. Dixon CJ, with whom Windeyer J agreed, said:
"'Safely' seems to mean safe from loss or destruction: for the subject is excise duty, not the condition of the goods. The provision is pointed at the loss of goods involving the loss of excise duty. The time of payment of excise duty is at or before entry for home consumption. The hypothesis is that by the loss of the goods duty has been escaped. There must be some doubt whether the destruction of the goods was also contemplated but upon the words of the section destruction is certainly covered. It is said, however, for the defendant that 'fail' involves some want of care, some neglect or default. Considering the object of the provision and the place it takes, this ground must 'fail'. It means to place on the person having possession, custody or control an absolute duty. …" (page 287)
His Honour rejected the notion that s. 60(1)(a) required that there be some want of care, neglect or default on the part of the person having the possession, custody or control of the goods. He said that the provision meant to place, subject only to an inevitable casualty or "Act of God", an absolute duty on that person to keep the goods safe from loss or destruction (page 287). Taylor J expanded upon this notion in the context of the responsibilities of the carrier of goods when he said:
"… whilst he is in possession of the goods it is his responsibility alone to ensure that the goods do not irregularly find their way into home consumption. It is in this sense that he is bound to keep the goods safely and to account for them. That being so he may escape liability if he is still in possession of the goods or if he can account for them by showing that they did not pass into home consumption from his hands. That he may do by showing that he has parted with possession of them in some authorized manner or, I should think, by showing that the goods whilst in his possession have been destroyed. …" (page 296)
Owen J expressed a similar view (page 305) as did McTiernan J. McTiernan J, however, perhaps drew any exception more narrowly than did Taylor J and did so but in terms consistent with the exception acknowledged by Dixon CJ. A person cannot be said to have fulfilled the task of keeping the goods safely, his Honour said, if the goods are stolen. The person has failed to keep the goods safely. He said that a person is liable under s. 60(1)(a) if:
"… he comes short of keeping the goods safely, that is preserving them from loss or damage. The word 'fails' in my opinion is not strong enough to impose upon the person concerned so onerous a duty as that of avoiding the unavoidable. … Lex non cogit ad impossibilia. Paragraph (a) should be read subject only to that presumption. … " (page 291)
As to whether goods are accounted for to the satisfaction of a Collector, Dixon CJ said of s. 60(1)(b) that:
"… it would seem that it is pointed at cases where it cannot be shown that the goods were lost or destroyed but at the same time they are not produced and their whereabouts is not disclosed. …" (page 287)
McTiernan J said of s. 60(1)(b) and of the interaction between that provision and s. 60(1)(b):
"Paragraph (b) is in my view a drag-net provision. It exposes every person who has or has been entrusted with the possession, custody or control of excisable goods which are subject to Customs' control to the liability of being requested by the Collector to account for them to his satisfaction. The accounting may be done by producing the goods or, if they are missing, by giving an explanation which is satisfactory to the Collector. He has a discretion, which he is bound to exercise reasonably, to reject what is done or stated by way of accounting for the goods. In my opinion it was reasonable for the Collector to reject the defendant's account of what happened to the goods because the reason for their disappearance from Customs' control, namely breaking entering and stealing, justified the Collector in considering that the defendant failed to keep the goods safely. The defendant was in default under par. (a) and that was sufficient to make it liable. Paragraph (b) was not, I think, intended to provide a person who contravenes par. (a) with the opportunity of explaining away his default thereunder." (page 291)
Owen J reached a similar conclusion when he said:
"The question then arises as to the meaning of the words 'does not account for those goods to the satisfaction of the Collector' in par. (b) of the sub-section. The use of the word 'or' in introducing the paragraph may at first sight appear to create some difficulty but if the purpose of the section is kept in mind I think that difficulty disappears. If the undoubted fact is that a custodian of goods has failed to keep them safe from the danger of going into consumption without payment of duty as, for example, where readily saleable goods have been stolen, par. (b) need not be called in aid by the Collector. But cases may easily be imagined in which the disappearance of the goods leaves it doubtful whether they may have gone into consumption or that it is likely that they will do so. If so, par. (b) may be invoked and the custodian may be required by the Collector to account for the absence of the goods in such manner as to satisfy him that the revenue has not suffered and, in the absence of an explanation which satisfies the Collector of that fact, the obligation to pay imposed by the latter part of the sub-section may be enforced. In the present case, the explanation given by the defendant for the disappearance of the goods was that they had been stolen and the probabilities were, in these circumstances, that they would go into consumption. The defendant failed to safeguard them against that danger and there was no need, in these circumstances, for the Collector to request the defendant to account for them. Nevertheless he did so and the account was not one upon which he was bound to be satisfied that the revenue had not suffered or would not be likely to suffer." (pages 305-306)
Menzies J expressed his views more broadly and did not consider the inter-relationship between ss. 60(1)(a) and (b) in the context of a failure to keep goods safely where they were lost or stolen and a failure where there had been an Act of God or inevitable consequence or, perhaps, simply a destruction of the goods in circumstances short of an inevitable consequence. His Honour said:
"… In many cases the failure to keep the goods safely will inevitably mean that no satisfactory account for them can be given but, notwithstanding this, I do not regard pars. (a) and (b) of s. 60(1) as necessarily cumulative provisions. They are expressed as alternatives and goods which might in fact have been kept safely enough may nevertheless not be accounted for satisfactorily merely because the person with, or entrusted with, possession, custody or control simply refuses to account for them at all. Of course it hardly needs to be said that if the goods have not been kept safely but an account for them is given to the satisfaction of the Collector, that would end the matter, for in such a case there would not be any demand by the Collector." (page 299)
Applying these principles, Deputy President McMahon concluded in Bollinger v Chief Executive Officer of Customs (AAT 12199, 11 September, 1997) that:
"It is not a sufficient accounting to disclose to Customs the details of the third party thought to have taken the goods or to cooperate in his apprehension. The Applicant is required to show that the goods have not got into home consumption without the payment of duty or that Customs control is still effective. Failure to account to the satisfaction of the respondent is simply a failure to assure the respondent that his control of the goods has not evaporated by one means or another."
Both the policy of s. 60 and the judgements in Collector of Customs (NSW) v Southern Shipping Co. Ltd were considered by Finkelstein J in Sidebottom v Guiliano. His Honour concluded:
" The object of s 60 is to impose an obligation upon a person in possession, custody or control of excisable goods to ensure that those goods do not find their way into home consumption without the payment of duty. First, the custodian of excisable goods is required to keep them safe, and if he fails to do so then he is liable to pay an amount equal to the excise duty (s 60(1)(a)). Secondly, the Collector is authorised to request an accounting to discover whether or not there has been a breach of that obligation (s 60(1)(b)). If the 'undoubted fact' is that a person in possession, custody or control of excisable goods has failed to keep them safely no purpose would be served by an accounting. The Collector can immediately rely upon par (a) and has no need to resort to par (b) for the purpose of making a demand for an amount equal to the unpaid duty. In that circumstance, in my opinion, par (b) cannot be invoked, and the subsection should be read down to that extent. In my view, par (b) can be relied upon when there is doubt about the whereabouts of excisable goods, or doubt as regards whether they have been kept safely. In those cases it is for the person in possession, custody or control to satisfy the Collector that the goods have not gone into home consumption without payment of duty. His failure to do so will render him liable to pay the debt due to the Commonwealth."
Have the applicants, or any of them, failed to keep the blended petroleum products safely? On the evidence, we are satisfied that the blended petroleum products have been sold and so have gone into home consumption without duty's being paid. They have, therefore, left the control of Customs and, in the context of s. 60, have not been kept safely. Who has failed to keep the goods safely? The answer to that question is that each of them has failed by failing to stop the blended petroleum products from going into home consumption.
If we are incorrect in that conclusion, we need to consider whether each or any of them has not accounted for the blended petroleum goods. Each has been requested by the Collector to do so. On the evidence we have, we are satisfied that none of the applicants has shown that the goods have not gone into home consumption without the payment of duty and none has shown that the control of Customs is still effective.
Should the Collector have exercised any discretion he may have to make the demand?
Section 60(1) does not expressly place an obligation upon the Collector to make a demand upon a person even when that person has failed to keep the goods safely or has not accounted for them to the satisfaction of the Collector upon his or her requesting that he or she do so. It does not do so, is a matter within the discretion of the Collector. Mr Murphy submitted that the discretion should not have been exercised to make the demand. At the heart of his submission was the proposition that making the demand could not protect the revenue as the CEO has already commenced an excise prosecution against the applicants in the same circumstances as those to which the demand relates.
In light of the authorities, we accept that the object of the Act is to ensure that goods do not find their way into home consumption without the payment of duty (see, for example, McTiernan J in Collector of Customs (NSW) v Southern Shipping Co. Ltd (paragraph 102 above) and Finkelstein J in Sidebottom v Guiliano at page 583). As we have already said, the scope of the review is limited to whether or not the decision to make the demand was the correct or preferable decision. It does not extend to a consideration of whether the amount demanded may be recovered from all or any of the applicants (see paragraph 78 above). The scope of an excise prosecution is different. It is a proceeding for the recovery of a penalty under the Act or for the condemnation of goods seized as forfeited. The penal provisions are found in Part X of the Act as well as in other Parts of the Act. A person may be found guilty of offences specified in that Part and those offences are punishable on conviction. Although civil in character, it has recently been held that the standard of proof to be applied is the criminal burden (i.e. beyond reasonable doubt) rather than the civil standard (The Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd and Wright and Bryce, [2001] QCA 280, unreported, 20 July, 2001, McMurdo P, Thomas JA and Byrne J). That is so regardless of whether the penalties were imposed under Part X or elsewhere in the Act. A decision of the Full Court of the Federal Court a little earlier in the year did not need to consider the standard of proof to be applied but did conclude that a decision (such as a decision to issue a search warrant) taken in relation to an excise prosecution is a "related criminal justice process decision" for the purposes of s. 9A of the Administrative Decisions (Judicial Review) Act 1977 (Chief Executive Officer of Customs v Jiang [2001] FCA 145, O'Loughlin, North and Weinberg JJ).
In our view, the object of a demand made under s. 60(1) and an excise prosecution are quite different. One is to protect the revenue and, if thought appropriate, to enable the amount of duty to be sued for as a debt in a court of competent jurisdiction (s. 60(2)). The other is to prosecute a person for breach of a provision of the Act. That is to say, it is to ascertain whether a person has committed an offence. It may be that the penalty may be assessed using as its base the amount of duty that would have been payable on the goods to which the offence relates if those goods had been entered for home consumption on specified dates (s. 129). Even so, a penalty imposed in proceedings that "share many of the characteristics of criminal proceedings" (Chief Executive Officer of Customs v Jiang at paragraph 87), does not equate with a debt that may be recovered under s. 60(2) in a civil proceeding. One is to punish and the other to protect the revenue. What penalty is actually imposed is not a matter for us and nor is the amount of any amount recovered in a civil proceeding. That with which we are concerned is simply the issue of the demand. The fact that there is an excise prosecution for the imposition of a penalty does not affect the manner in which we should exercise a discretion directed to protecting the revenue.
Since the matter was heard, Ryan J has handed down his decision in Moama Refinery Pty Ltd v Chief Executive Officer of Customs [2001] FCA 1287. His Honour did not conclude whether s. 60(1) confers a discretion but did conclude that, if there is such a discretion, it is unconfined. The factors that must be taken into account in deciding whether or not to exercise the discretion are determined by the subject-matter, scope and purpose of the Act (paragraph 30). Nothing in the subject-matter, scope or purpose of the Act compelled him to conclude that matters such as the applicant's belief that it was acting properly, the policy of the Act and the applicant's attempts to comply with the Act could be regarded as either relevant or irrelevant. As Ryan J said, "… there are many matters which may legitimately be taken into account in the exercise of this discretion. They include, most obviously, the perceived solvency or liquidity of the potential recipients of a demand." (paragraph 31)
Ryan J had earlier in his reasons considered whether a demand could be made under s. 60 in relation to more than one person. He referred first to a decision of the High Court in Wing On and Company Limited v The Collector of Customs for NSW (1938) 60 CLR 97 (Latham CJ, Rich and Dixon JJ). In that case, the appellant, which knew that duty had not been paid on certain goods brought into Australia, nevertheless purchased those goods and sold them to a third party. Section 153 of the Customs Act provided, in part, that all duties are Crown debts and charged on goods in respect of which they are payable by the owner of the goods. The word "owner" included "… any person … being or holding himself out to be the owner, importer, exporter, consignee, agent or person possessed of, or beneficially interested in, or having any control of, or power of disposition over the goods".
Ryan J referred to the following passages from the judgements of the High Court:
"26. Latham CJ rejected an argument on behalf of the appellant that 'owner' in s 153 meant 'owner at the time of importation of the goods'. Rich J at 107, divined the intention of the legislature to be;
'that until the goods were entered for home consumption at least none was to take ownership except cum onere, and that if he enjoyed full ownership he should pay the charge, i.e., the duty. The facts show that this was the situation of the appellant who, I think, comes fairly within the meaning of the provision making the duty payable by the owner.'
27.Dixon J was in general agreement with Latham CJ but observed, at 109;
'When sec. 153 charges the duty upon the goods, it means, I think, to impose a specific charge upon the goods which shall bind all persons taking them, at all events unless they are bona-fide purchasers for value.'"
He then concluded:
"28. Wing On makes clear, I consider, that several persons can successively be 'owners' of goods and remain so while the goods continue to be subject to Customs control. There is nothing express or implied in s 60 to indicate that each of those successive 'owners' may not be subject to a demand for payment under that section unless and until duty on the goods has been paid." (paragraph 28)
Mr Murphy submitted that Moama Refinery Pty Ltd v Chief Executive Officer of Customs is distinguishable from the present case in that each of the successive owners, Burmah Fuels Australia Ltd, Moama Refinery Pty Ltd and DCF Pty Ltd, had possession, custody and control of the fuel at different times. That is to be contrasted with the present situation in which the Collector contends that APS, RPM, GVLT, Mr Kelvin Sidebottom and Mr Ray Sidebottom all had possession, custody and control at the same time. Only APS was a relevant owner.
Mr Walters submitted that Ryan J's reference to "owner" was, in light of the judgement in Wing On and Company Limited v The Collector of Customs for NSW, a reference to "possession, custody or control". The principle is clear, he submitted, that any person who is or has been in possession, custody or control of the excisable goods is liable to receive a request to account from a Collector. Furthermore, in view of the objects of the Act and the nature of s. 60(1)(b) as a "drag-net provision" (see McTiernan J in Collector of Customs (NSW) v Southern Shipping Co. Ltd, paragraph 136 above), every person who has been entrusted with the possession, custody or control of the goods is liable to being requested to account for them.
Certainly, as Mr Murphy submitted, Ryan J was concerned with a situation in which several entities were successively regarded as having possession, custody or control of the goods within the meaning of s. 60(1) of the Act and while the goods continued to be under Customs' control. There was nothing to stop a demand being issued to each of those persons unless and until the duty has been paid. His Honour was not concerned with a situation in which more than one person might be thought to have possession, custody or control at the same time. It does not follow, however, that a different conclusion should be reached when more than one person has possession, custody or control at any particular time.
Ryan J's reasoning is based on the wording of s. 60(1) and the object of the Act. That object is to ensure that duty is paid on imported goods. The requirement that the goods remain under the control of Customs until delivery for home consumption or until export is an essential element in achieving that object. At the same time, the Act does permit goods to be moved but they remain always under the control of Customs. The only security that Customs has that duty is recoverable, should those goods enter for home consumption without payment of duty and so become virtually untraceable, is through the mechanism offered by s. 60. It places the obligation to comply with the Collector's demand upon the "person … who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the control of Customs" and who fails to keep the goods safely or to account for them (emphasis added). In that way, s. 60 places the obligation successively upon those who have had possession, custody or control of goods of the type specified. At the same time, its drafting does not suggest that only one person may meet the criteria at any one time. As is clear from The Commissioner of Taxation v The Australia and New Zealand Banking Group Limited, one person may have control of goods while another has custody of them at the same time. In view of the object of the section and of the Act generally to protect the revenue, it is clear that s. 60(1) is intended to allow a Collector to issue a demand to any person who fulfils the criteria. Whether there is more than one such person is a question of fact in each case. On the facts of this case, and, for the reasons we have given earlier, we are satisfied that there are five persons who fulfilled the criteria.
In this case, we do not consider that there is any reason why the Collector should not have issued a demand to each of the applicants. Each met the criteria and none is in any different position from the others in terms of their failing to meet their obligations to keep the goods safely. That, together with our conclusion that our function does not extend to a consideration of whether the amount demanded may be recovered from all or any of the applicants, lead us to conclude that a notice should have been issued to each of the applicants under s. 60(1).
Therefore, for the reasons we have given, we affirm the decision of the respondent dated 31 January, 2001.
I certify that the one hundred and fifty-three preceding paragraphs are a true copy of the reasons for the decision herein of Miss S A Forgie (Deputy President),
Mr W G McLean (Member)Signed: .......…............................…….........
D. De Andrade Secretary
Dates of Hearing 3, 4, 5 and 7 September, 2001
Date of Decision 24 December, 2001
Counsel for the Applicants Mr Murphy and Ms Lodge
Solicitor for the Applicants Blake Dawson Waldron
Counsels for the Respondent Mr Walters and Mr Livermore
Solicitor for the Respondent Australian Government Solicitor
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